The current price of a non-dividend-paying stock is $100 and you expect the stock price to be either $170 or $50 after 1 years. A European put option on the stock has a strike price of $76 and expires in 1 years. The risk-free rate is 6% (EAR).

Part 1: How many shares do you need to sell to create a portfolio that replicates the payoff from one put option?

Part 2: How much money do you need to invest in bonds (lend) to create a portfolio that replicates the payoff from one put option?

Part 3: What should be the price (premium) of the put option?