Do answer both ASAP. "up" "down"90Sa110S 10085Let C(100) be the price of a European call option on stock A that expires inperiod 2 with the strike price 100.Let P(100) be the price of European put option on stock A that expires inperiod 2 with the strike price 100.(a) Solve for ro(b) Calculate C(100) - P(100) Question 2We consider an example of constructing a synthetic safe asset with two riskyassets. Suppose that there are two periods: 0, and 1. We consider stocks Aand B. Neither of the two stocks pay any dividend.In period 0, the price of stock A is S = 99.5, the price of stock B is S 94.The one-period risk-free rate in period 0 is denoted by ro.In period 1, there are two states: “up" and "down". State "up" occurs withprobability 0.6; State "down" occurs with probability 0.4. The prices of thetwo stocks in period 1 is given by the following table.The one-period risk-free rate in period 1 ri is 5%.

The binomial model is used to price options where the final states of the stock are known. It can…

Sa Sb "up" 110 100 "down" 90 85 Let C(100) be the price of a European call option on stock A that expires in period 2 with the strike price 100. Let P(100) be the price of European put option on stock A that expires in period 2 with the strike price 100. (a) Solve for ro (b) Calculate C(100) - P(100)