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You are faced with the probability distribution of the HPR on the stock market index fund given in Spreadsheet 4.1, below. Suppose the price of
You are faced with the probability distribution of the HPR on the stock market index fund given in Spreadsheet 4.1, below. Suppose the price of a put option on a share of the index fund with exercise price of $110 and maturity of one year is $12 a. What is the probability distribution of the HPR on the put option? (Remember that the cost of the index fund is $100 per share, and the cost of the put option is $12.) (Round your answer to 2 decimal places. Omit the sign from your response. Indicate negative values by a minus sign.) b. What is the probability distribution of the HPR on a portfolio consisting of one share of the index fund and a put option? (Round your answer to 1 decimal place. Omit the from your response.)
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