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5. The current stock price is 100 and in the good state of the world it will be 120 and in a bad state of the world is 80. The risk free rate is 5%.
1. If u issue a bond with a principal of 95 what will be its current price?
2. What will be the equity price
3. Value the put option through a replicating portfolio and verify the put call parity directly.
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