This problem concerns the pricing of a European option in a two-period multiplicative binomial tree market. Suppose the present stock price is S0=50, the time interval is T=0.5 years, and the multiplicative factors are u=1.2,d=0.8 (so the stock price 0.5 years from now is either uS0 or dS0, and the stock price 1 year from now is either u2S0, udS0, or d2S0 ). Assume the risk-free rate is constant and is 4% per year. a) 20 Points: Find the no arbitrage price of a European put with strike 45 and maturity 1 year. b) 20 Points: Verify that the formula derived in class for the price of a derivative security in a general N-period tree matches the price from part a). c) 20 Points: Describe the trading strategy that replicates this option, using stock and the risk-free bond