A stock priced at $ 5 0 has two possible outcomes, either increases to $ 6 0

Fantastic news! We've Found the answer you've been seeking!

Question:

A stock priced at $

50

has two possible outcomes, either increases to $

60

or decreases to $

42 .

If the stock goes up

,

the payoff of the stock's call option

=

5 .

But, if the stock price declines to $

42,

the calls will expire worthless. Given these two possible outcomes, what is the Hedge Ratio of the Call option? Round your answer to two decimals.

The listed correct answer was

0.28 .

I could not find a way to get this.

Posted Date: May 19, 2024 12:17 AM

See More Questions

a1a2 (d) Suppose a Cobb Douglass production function with two inputs and exponents inside the production function y = xx22 that are less than one. Derive the profit maximizing choices of x1, x2, andy...
Let X be a random variable with the following probability distribution: Find E(X) and E(X2) and then, evaluate E [(2X +1)2]. -3 f(x)
Why is a scatter diagram helpful when used in conjunction with other methods of cost estimation?
(Mutually exclusive projects) The following projects are offered to you. The annual cash flows are expected to continue forever. a. What is the IRR of each project? b. If the cost of capital is 7%,...
Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost a total of $4,290. During the month, Fit Gym purchased and sold merchandise on account as follows: Requirements 1....
The availability of mortgage funding affects: a. Nothing b. Both supply and demand for housing c. Supply of housing d. Demand for housing
The survey was conducted to determine reasons and ways to combat non-compliance from the acquired employees. Fifty employees were surveyed, N = 50. The survey consisted of 5 questions on one scale....
1.A property-casualty insurer brings in $6.17 million in premiums on its homeowners MP line of insurance. The line's losses amount to $4,238,790, expenses are $1,523,990, and dividends are $104,890....
Accounting software Courses 1. Re cord all the transactions previously done manually into 2. Sage 50 and QuickBooks and create and print the identical financial statements, aged accounts...
Getty Petroleum produces oil. On May 1 it started production of 240,000 barrels of oil and shipped 200,000 barrels to the pipeline. The costs incurred for May are: Materials $6,000,000 and...
You have been hired to lead a software project to design a Library Management System (LMS) for your local library at Jonesville. The library has been managed manually using written documentation to...
Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are: Direct materials$4.00 Direct labor6.00 Variable overhead3.00 Fixed overhead1.00 Marketingfixed7.00...
Suppose you are offered $10,300 today but must make the following payments: If the appropriate discount rate is 23 percent, should you accept this offer? Y0=10,300 Y1=-5500 Y2=-4200 Y3=-3300 Y4=-2000...
A firm has the following balance sheet: Assets Cash Accounts receivable Inventory Plant and equipment $ 15,000 150,000 92,000 170,000 $427,000 Liabilities and Equity Accounts payable Long-term debt...
Determine whether the sequence of edges represents an Euler circuit in Multigraph 15: \(K ightarrow L ightarrow N ightarrow M ightarrow O ightarrow S ightarrow T ightarrow Q ightarrow U ightarrow P...
The trial balance for Kilda Services, Inc., at the end of July appears at the top of the opposite page. It does not balance because of a number of errors. Kildas accountant compared the amounts in...
Give an example of a pair of edges that could be duplicated to eulerize Multigraph 14. Use the graphs and multigraphs in Figure 12.354.

A stock priced at $ 5 0 has two possible outcomes, either increases to $ 6 0

Question:

Expert Answer:

Students also viewed these finance questions