Question: 1.12. Use a one-period binomial model to estimate the hedge ratio and the fair value of the call option when the initial asset price is

1.12. Use a one-period binomial model to estimate the hedge ratio and the fair value of the call option when the initial asset price is $50, the exercise price of the call option is also $50, the rate of interest for bonds is 10%, and the period is one year. Assume that the asset price moves up by 25% or down by 20% per year.

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