Question: You are attempting to value a put option with an exercise price of $190 and one year to expiration. The underlying stock pays no dividends,

You are attempting to value a put option with an exercise price of $190 and one year to expiration. The underlying stock pays no dividends, its current price is $190, and you believe it has a 50% chance of increasing to $250 and a 50% chance of decreasing to $100. The risk-free rate of interest is 15%.

a. What will be the payoff to the put, P_u, if the stock goes up?

Payoff ____

b. What will be the payoff, P_d, if the stock price falls?

Payoff___

c. What is the weighted average value of the pay off? (Do not round intermediate calculations. Round your answer to 3 decimal places.)

Discounted weighted average ___

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