Risk Neutrality and Valuing a Derivative Using a One-Period Binomial Model

I read this conclusion from CFA website and dont really understand it. Would you please explain to me. Thanks in advance.

  1. “If a call option is trading at a higher price than that implied from the binomial model, investors can earn a return in excess of the risk-free rate by borrowing at the risk-free rate, selling the call, and buying the underlying”
    2… A put option on a non-dividend-paying stock has an exercise price, X, of £21 and six months left to maturity. The current stock price, S 0, is £20, and an investor believes that the stock’s price in six months’ time will be either 10% higher or 10% lower.
    What is the no-arbitrage price of the put option?

My idea for this question

  • Pseudo= 0.7, Cu=0, Cd=3
  • P0= 0.3*3/(1+4%)^0.5= 0.88

But answer is 1.18