13.1 Suppose that Bigco is currently trading for $100 per share. We know that in one year Bigco stock will sell for either $150 per share (good day) or for $75 per share (bad day). No other prices are possible, and the stock does not pay any dividends. The riskless interest rate is 5 percent, so a bond worth B1 next year sells for B0 5 B1 /(1 1 r) today. Stocks, bonds, and options can all be bought or sold, long and short, without any transaction costs.

(b) What is the value of a European put option with a strike price of $100 and expiration in one year?