Construct a tracking portfolio for the option

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Reference no: EM132184075

Question - Consider a European put option on a non-dividend paying stock with strike price $31 and time to expiration 4 months. The stock has a current price of $30 and assume that in four months its price will be either $34 or $28. The risk-free interest rate is 3% per year.

1. Construct a tracking portfolio for the option.

2. What is the value of the put option?

Reference no: EM132184075

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