Question: In Section 21-1 we used a simple one-step model to value two Google options each with an exercise price of $530. We showed that the

In Section 21-1 we used a simple one-step model to value two Google options each with an exercise price of $530. We showed that the call option could be replicated by borrowing $233.22 and investing $294.44 in .556 shares of Google stock. The put option could be replicated by selling short $235.56 of Google stock and lending $291.52.
a. If the beta of Google stock is 1.15, what is the beta of the call according to the one-step model?
b. What is the beta of the put?
c. Suppose that you were to buy one call and invest the present value of the exercise price in a bank loan. What would be the beta of your Suppose instead that you were to buy one share and one put option of Google. What would be the beta of your now?
e. Your answers to parts (c) and (d) should be the same. Explain.

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