Question: 1. (10 marks) Use risk neutral valuation to value a PUT option on 8,000 with a strike price of 10,000. (/) = 0.80/, = 10%

1.(10 marks) Use risk neutral valuation to value a PUT option on 8,000 with a strike price of 10,000.

(/) = 0.80/, = 10% and = 3%

In the next year, there are two possibilities:

(/) = 1.00/ or

(/) = 0.65/

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