In a one-period binomial model, assume that the current stock price is $100, and that it will rise to $120 or fall to $85 after one month. The gross return for the risk free rate of return for one period is 1.015. Using the One Period Binomial Model to create a replicating portfolio, what is the price of a one-month put option at a strike price of $100?

		a. $7.64
		b. $7.69
		c. $7.84
		d. $7.69

From problem 4, if the market price of the put option is $7.50 (underpriced), what would be the steps in creating risk free arbitrage profit?

		a. Buy put, Buy the stock, Borrow
		b. Sell put, Short the stock, Invest
		c. Buy put, Short the stock, Invest
		d. Sell put, Buy the stock, Borrow

1. From problem 4, if the market price of the put option is $8.25 (overpriced), what would be the steps in creating risk free arbitrage profit?

   		a. Buy put, Buy the stock, Borrow
   		b. Sell put, Short the stock, Invest
   		c. Buy put, Short the stock, Invest
   		d. Sell put, Buy the stock, Borrow