a. Consider a call option. If, in a two-state model, a stock can take a price of $120 or $90, what would be the hedge ratio for each of the following exercise prices: $120, $110, $100, $90?

(Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places.)

X		Hedge Ratio
$	120
$	110
$	100
$	90

b. What do you conclude about the hedge ratio as the option becomes progressively more in the money?

multiple choice

a) Increases to a maximum of 1.0

b) Decreases to a minimum of 0

. Consider a call option. If, in a two-state model, a stock can take a price of $120 or $90, what would be the hedge ratio for each of he following exercise prices: $120,$110,$100,$90? Leave no cells blank - be certain to enter " 0 " wherever required. Round your answers to 2 decimal places.) b. What do you conclude about the hedge ratio as the option becomes progressively more in the money? Increases to a maximum of 1.0 Decreases to a minimum of 0x