IBM is trading at $72 per share today. Under a one-step binomial setting, its price can either go up to $100 in a good economy or go down to $60 per share in a bad economy next year. For simplicity, let's assume the interest rate on T-Bill is zero and the stock does not pay dividend.

Question 11 (1 point)

What's the replicating portfolio for a put option with a strike price of $70?

Question 11 options:

	Short 0.5 share of IBM; Long $30 T-Bills;
	Short 0.25 share of IBM; Long $25 T-Bills;
	Buy 0.5 share of IBM; Short $30 T-Bills;
	Buy 0.25 share of IBM; Short $25 T-Bills;

Question 12 (1 point)

What's the premium for a put option with a strike price of $70?

Question 12 options:

	$4
	$5
	$6
	$7