Let's price a put option on a stock using the binomial model. The stock does not pay any dividends.

In your estimation, the stock will either go up by 10% or it will go down by 10% over the next period. The risk free rate is 4%. Build the tree, if the underlying share's price is $230!

Su= ____

Sd= ____

What will be the Put's payoff at expiration, if it gives the holder the right to sell shares at $237?

Pu= ____

Pd= ____

The risk neutral probability for pricing options in this tree is _____.

The put's premium is _____.

To create a hedge portfolio, you will need to buy ____ shares for every 1000 put ____ (write written or bought).

The value of this hedge portfolio at the beginning is ____ and at the end of the period it is _____.