Problem 22-3 Binomial model The share price of Heavy Metal (HM) changes only once a month:...

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Problem 22-3 Binomial model The share price of Heavy Metal (HM) changes only once a month: Either it goes up by 20% or it falls by 18.1%. Its price now is $46.2. The interest rate is 0.7% per month. a. What is the value of a one-month call option with an exercise price of $46.2? b. What is the option delta? c. The payoffs of the call option can be replicated by buying shares of stock and borrowing. What amount should be invested in stock and what amount must be borrowed? d. What is the value of a two-month call option with an exercise price of $47? e. What is the option delta of the two-month call over the first one-month period? Complete this question by entering your answers in the tabs below. Req A and B Req C Req D and E a. What is the value of a one-month call option with an exercise price of $46.2? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. What is the option delta? Note: Do not round intermediate calculations. Round your answer to 3 decimal places. a. Value of call b. Delta Show less Problem 22-3 Binomial model The share price of Heavy Metal (HM) changes only once a month: Either it goes up by 20% or it falls by 18.1%. Its price now is $46.2. The interest rate is 0.7% per month. a. What is the value of a one-month call option with an exercise price of $46.2? b. What is the option delta? c. The payoffs of the call option can be replicated by buying shares of stock and borrowing. What amount should be invested in stock and what amount must be borrowed? d. What is the value of a two-month call option with an exercise price of $47? e. What is the option delta of the two-month call over the first one-month period? Complete this question by entering your answers in the tabs below. Req A and B Req C Req D and E a. What is the value of a one-month call option with an exercise price of $46.2? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. What is the option delta? Note: Do not round intermediate calculations. Round your answer to 3 decimal places. a. Value of call b. Delta Show less