2. (20 pis) Let 0 = (un, w2, us) and 7 = 1 (time to maturity). Consider the market with two risky stocks and one risk-free bond. Suppose the risk-free return R = 0.25, and the initial values of the stocks are given by S, (0) - 1, S,(0) - 1. Moreover Scenario 51 (1) S,(1) 0.5 0.5 2 1.5 0.5 1.5 (1) ( 10 pes) Is the market arbitrage free?' Justify your answer by finding the risk-neutral probabilities. (2) (10 pts) Consider now a European contingent claim (derivative) with final payoff H(w]) =5, H(w}) = 10, #(on) = 12.5. If the price of this claim is unique, find the unique initial price #(0). If the price is not unique, find the price range/interval for #(0) of this contingent claim