Question: Consider a one-time, two potential outcome framework where there exists Company Q stocurr selling for $55 per share and a riskless $100 face value

Consider a one-time, two potential outcome framework where there exists Company Q stocurr selling for $55 per share and a riskless $100 face value T-bill currently selling for $80. Suppose Company Q faces uncertainty, in that it will pay its owner either $30 or $75 in 1 year. Further assume that the physical probability that the stock will drop is 0.2. a. List the risk-neutral probabilities for this payoff space. b. Compute values for the Radon-Nikodym derivative for this change of measure. c. Value call and put options on this stock, with exercise prices equal to X = 60. d. Does put-call parity hold for this example?

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