Suppose the current price is 50 per share the stock price, Financial Management

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Suppose the current price is 50 per share the stock price

Suppose the current price is $50 per share. The stock price might go up to $80 per share or go down to $20 per share.

a. Can you derive the payoff of purchasing an European stock PUT option with exercise price $50 for one share?

b. Come up with a risk free portfolio that consists of the stock and the PUT option?

c. Based on the risk free portfolio, derive the no arbitrage premium for the European stock PUT option?

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Financial Management: Suppose the current price is 50 per share the stock price

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Financial Management: Suppose the current price is 50 per share the stock price

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