Question: Consider a call option. If, in a two-state model, a stock can take a price of $180 or $135, what would be the hedge ratio

Consider a call option. If, in a two-state model, a stock can take a price of $180 or $135, what would be the hedge ratio for each of the following exercise prices: $180, $175, $165, $135? (Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places.)

X		Hedge Ratio
$	180
$	175
$	165
$	135

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 0

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