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Problem 2 Consider a stock and a bond with the following price movements between t=0 and t=1? (i) What are the date t=1 payoffs of
Problem 2 Consider a stock and a bond with the following price movements between t=0 and t=1? (i) What are the date t=1 payoffs of a put on the stock which has an exercise price of 12? (ii) What portfolio of stocks and bonds gives the same payoffs as a put with an exercise price of 12? (iii) What is the price of a put with an exercise price of 12? Problem 2 Consider a stock and a bond with the following price movements between t=0 and t=1? (i) What are the date t=1 payoffs of a put on the stock which has an exercise price of 12? (ii) What portfolio of stocks and bonds gives the same payoffs as a put with an exercise price of 12? (iii) What is the price of a put with an exercise price of 12
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