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Q. Using the arbitrage principle, determine the prices of a put option on stock A with an exercise price of $4 and a call option

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Q. Using the arbitrage principle, determine the prices of a put option on stock A with an exercise price of $4 and a call option on stock B with an exercise price of $2.

Consider a capital market with two securities. The payoffs of these securities in the two equally likely states of the world are given in the table below. Payoff Price Security State 1 State 2 PA=2 A 4 2 PB=3 B 3 4

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