Consider a corporation that is worth 150 (million) in the Up-state and 50 (million) in the Down-state. Suppose the firm owes creditors a total of 80 (million) to be paid at date 1.

Suppose next that the corporation has no debt: it is all-equity financed. Suppose there are 1 million shares outstanding.

h) Consider a portfolio that is long 80 units of the Riskless Asset and short one put option. What are the payoffs to this portfolio in the two states at date 1 and what is it worth at date 0? Does this portfolio resemble something seen above?