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noindent Problem 3: Two-stage Binomial Options Pricing (5 points) A stock with current share price of S20 can either go up or down by S2 in each of the next two months, with up occurring 55% of the time and down occurring 45% of the tine. To keep things simple, we will assume that the risk-free rate is 0%, and that you can both borrow and lend at this rate. There are call and put options traded with a strike price of $22 expiring in two months. Our goal will be to find the no-arbitrage price of both the call and the put today. Shh $24 Sh $22 45% Sul- So $20 Sih $20 45% Si-Si Si$18 45%-S11-S16 (a) Find the no-arbitrage price of both the call and the put one month from now if the stock is worth $22 No-arbitrage call price Ch: No-arbitrage put price : noindent Problem 3: Two-stage Binomial Options Pricing (5 points) A stock with current share price of S20 can either go up or down by S2 in each of the next two months, with up occurring 55% of the time and down occurring 45% of the tine. To keep things simple, we will assume that the risk-free rate is 0%, and that you can both borrow and lend at this rate. There are call and put options traded with a strike price of $22 expiring in two months. Our goal will be to find the no-arbitrage price of both the call and the put today. Shh $24 Sh $22 45% Sul- So $20 Sih $20 45% Si-Si Si$18 45%-S11-S16 (a) Find the no-arbitrage price of both the call and the put one month from now if the stock is worth $22 No-arbitrage call price Ch: No-arbitrage put price