1. The current stock price of a non-dividend-paying stock is $87. The risk-free rate is 2% per annum with continuous compounding.

In 6 months, the stock price could be either $90 or $85.

Consider a European put option with a strike price of $88 that expires in six months.

If the stock price goes up, the payoff of the put option at expiration will be [ Select ] ["$2", "$0", "$3", "$5"] .

If the stock price goes down, the payoff of the put option at expiration will be [ Select ] ["$0", "$3", "$2", "$5"] .

2. In the problem above, what is the value of the put option today?