A put option grants the owner the right, but not the obligation to sell a stock at a predetermined exercise price X. If we assume X = CNY50, then the put option value in one period (p₁) is equal to Max(0, CNY50 − S₁).

1. Using a one-period binomial tree model with the same prices in one year, initial stock price (S₀) of CNY40, and 5 percent discount rate ®, create a riskfree portfolio replicating the put option with 0.75 units of the underlying asset and solve for the put option price (p₀).