Suppose that a stock price is currently 32 dollars, and it is known that three months from now, the price will be either 40 dollars or 23 dollars. Suppose further that you set up a riskless portfolio that consists of buying 1 European put option with a strike price of 34 dollars, and buying an appropriate number of shares of the stock. Assuming that no arbitrage opportunities exist and a risk-free interest rate of 7.9 percent, what is the value of the riskless portfolio three months before the exercise date?
Answer = dollars.