Let A(0) = 100, A(1) = 105, S(0) = 90 and S(1) = {100, with probability 2/5 , 80, with probability 3/5} .
1. Suppose P is a put option with strike price 95 and exercise time t = 1. Compute the price P(0) of this put option
2. Evaluate the expected returns E(KS) and E(KP).