You are given the following information about the security market: i). There are two stocks, X and Y, which do not pay dividend. ii) The current prices for X and Y are both $100. i) The annualized risk-free saving rate is 10% and the annualized risk-free borrowing rate is 20% iv) There are three possible states for the prices of X and Y one year from now "state" "1" "2" stock X 200 50 stock Y 0 0 "3" 0 400 Let Cx be the price of a European call option on X, and Py be the price of a European put option on Y. Both options expire in one year and have a strike price of $95. 1 a. Use X, Y, and risk-free saving to replicate the payoff of the portfolio: long the put on Y and short the call on X. b. Arbitrage Restriction. There exist a minimum upper bound and a maximum lower bound for Py - Cx such that there is no arbitrage opportunity. Find the upper bound and the lower bound. You are given the following information about the security market: i). There are two stocks, X and Y, which do not pay dividend. ii) The current prices for X and Y are both $100. i) The annualized risk-free saving rate is 10% and the annualized risk-free borrowing rate is 20% iv) There are three possible states for the prices of X and Y one year from now "state" "1" "2" stock X 200 50 stock Y 0 0 "3" 0 400 Let Cx be the price of a European call option on X, and Py be the price of a European put option on Y. Both options expire in one year and have a strike price of $95. 1 a. Use X, Y, and risk-free saving to replicate the payoff of the portfolio: long the put on Y and short the call on X. b. Arbitrage Restriction. There exist a minimum upper bound and a maximum lower bound for Py - Cx such that there is no arbitrage opportunity. Find the upper bound and the lower bound