(Solved): Problem 2. (Put-call parity, 8') Suppose we have the following instruments: (i) risk-free bonds (ri ...

Problem 2. (Put-call parity, 8') Suppose we have the following instruments: (i) risk-free bonds (risk-free rate is r, continuously compounded and annualized), (ii) shares of a stock that does not pay dividends, (iii) European call options on shares of that stock with strike $\mathrm{K}$ and time to maturity $\mathrm{T}$. Please find the (static) replicating portfolio for a European put option with the same underlying asset, strike $\mathrm{K}$, and time to maturity $\mathrm{T}$, and present the cash-flow table for your replicating portfolio.