Question: Q) Consider a two period, two scenario world where a stock price is $45, the risk-free rate is 5% and the stock can either go

Q) Consider a two period, two scenario world where a stock price is $45, the risk-free rate is 5% and the stock can either go up 20% or down 20% over one year. A call option expiring at the end of the second period has an exercise price of $40. calculate the following

a) use the two period binomial model to calculate the value of the call at T=0

b) calculate h at T+0

c) calculate h at T=1

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