A stock has equal probability to go up or down in value by 15% in each of the next two

current stock price is $60 and the risk-free rate is 7%

Answer questions from 1 to 3

1- After the stock went down in the first year, you decide to follow the protective put

strateGy using

the at-the-money put option. What will be the two possible valuest your portfolio (the stock plus the put) by the end of the second year? (Hint: you

should compute "stock price in the end of year 2, plus the option payment at the

expiration, less what you paid for the option in the end of year 1")