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3. [Chapter 21] We will derive a two-state put option value in this problem. Data: 80:100'X=110'rf=10 .The twopossibilities for ST are 130 and 80. a.

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3. [Chapter 21] We will derive a two-state put option value in this problem. Data: 80:100'X=110'rf=10 .The twopossibilities for ST are 130 and 80. a. Show the payoff of the put in each of the two possible states. b. Form a portfolio of three shares of stock and five puts. What is the payoff to this portfolio in each of the two states? c. What is the present value of the portfolio

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