Question: a. Consider a call option. If, in a two-state model, a stock can take a price of $124 or $93, what would be the hedge

a.Consider a call option. If, in a two-state model, a stock can take a price of $124 or $93, what would be the hedge ratio for each of the following exercise prices: $124, $115, $105, $93?(Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places.)

X Hedge Ratio

$124

$115

$105

$93

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

Increases to a maximum of 1.0Decreases to a minimum of 0

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