A stock and a riskless bond are tradable assets. The stock price is currently $100. Over the next three month period it is expected to go up by 5% in the upstate or down by 5% in the "down state. The risk-free interest rate is 2% per annum with continuous compounding alA new asset Ahas St payoff in the upstate and so payoff in the "down" state. Use the one-step binomial tree model to determine the price of asset A. (2 marks) b) A new asset 8 h $0 payoff in the upstate and 51 payoff in the "down" state. Explain in detail how to use stock and riskless bond to replicate the payoffs of asset a (1 marlo What is the economic interpretation of a portfolio with one unit of asset A and one unit of asset B? What is the price of this portfolio? (2 marks) A stock and a riskless bond are tradable assets. The stock price is currently $100. Over the next three month period it is expected to go up by 5% in the upstate or down by 5% in the "down state. The risk-free interest rate is 2% per annum with continuous compounding alA new asset Ahas St payoff in the upstate and so payoff in the "down" state. Use the one-step binomial tree model to determine the price of asset A. (2 marks) b) A new asset 8 h $0 payoff in the upstate and 51 payoff in the "down" state. Explain in detail how to use stock and riskless bond to replicate the payoffs of asset a (1 marlo What is the economic interpretation of a portfolio with one unit of asset A and one unit of asset B? What is the price of this portfolio? (2 marks)