Assume KBC stock is currently at S = $100. After one period
Assignment 2Due date – Friday 27 May at 4pmQuestion 1Assume KBC stock is currently at S = $100. After one period, the price will move to one of thefollowing two values: [uS and dS], where [u = 1.2; d = 0.9]. A $1.00 investment in the risk-free assetusing continuous compounding will return $1.10 at the end of the period.(a) Find the risk-neutral probabilities governing the movement of the stock price. (2 marks)(b) For a strike price of 100 for call, find the delta of the call. (2 marks)(c) For a strike of 100 for put, find the delta of the put. (2 marks)(d) Compute the difference between the call delta and the put delta and explain the answer youGet. (6 marks)Question 2A bullish call spread is bullish on direction. Is it also bullish on volatility? Let’s assume the payoffdiagram with exer