Question: = $100. 28. Consider the single-period model in which the price of the stock today is S(0) In the next period it can go

= $100. 28. Consider the single-period model in which the price of

= $100. 28. Consider the single-period model in which the price of the stock today is S(0) In the next period it can go up to $110, stay at $100, or go down to $80. The price of the European put on this stock with strike price $105 is $8, and the price of the European put with strike price $95 is $5, with both options expiring in the next period. Find the portfolio that replicates the payoff of the risk-free security that pays $1 after one period regardless of what happens.

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