Question: 10. Over the coming year, Stock X price will decrease to $80 from its current level of $100 or it will rise to $125. The

10. Over the coming year, Stock X price will decrease to $80 from its current level of $100 or it will rise to $125. The one-year interest rate is 2.5%. Consider a one-year put option on stock X with a strike price of $118. (a) To replicate this put, find the number of shares to be purchased or sold and the units of ZCB with face value of $1 to be purchased or sold. (b) Use the replicating-portfolio method to value this put. (c) In a risk-neutral world, what is the probability that stock X will rise in price? (d) Use the risk-neutral method to check your valuation of the put

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