Consider an economy with two dates (t=0,1) and at t=1 there are three states. The following three stocks are traded: X1=(10,0,30) X2=(0,20,40) X3=(20,20,0) The t=0 prices of these stocks are given as follows (P1, P2, P3)=(12, 14, 8). (a) Is there an arbitrage? [2p] Suppose an investment firm sells options. (b) What is the t=0 price (premium) of a call option on stock 2 with exercise price E=10? [3p] What is the t=0 price (premium) of a put option on stock 1 with exercise price E=20? [3p] Consider an economy with two dates (t=0,1) and at t=1 there are three states. The following three stocks are traded: X1=(10,0,30) X2=(0,20,40) X3=(20,20,0) The t=0 prices of these stocks are given as follows (P1, P2, P3)=(12, 14, 8). (a) Is there an arbitrage? [2p] Suppose an investment firm sells options. (b) What is the t=0 price (premium) of a call option on stock 2 with exercise price E=10? [3p] What is the t=0 price (premium) of a put option on stock 1 with exercise price E=20? [3p]