Question: Data: S 0 = 100; X = 120; 1 + r = 1.2. The two possibilities for S T are 130 and 80. a-1. The

Data: S₀ = 100; X = 120; 1 + r = 1.2. The two possibilities for S_T are 130 and 80.

a-1. The range of S is 50 while that of C is 10 across the two states. What is the hedge ratio of the call? (Round your answer to 2 decimal places.)

a-2. Calculate the value of a call option on the stock with an exercise price of 120. (Do not use continuous compounding to calculate the present value of X in this example because we are using a two-state model here; the assumed 20% interest rate is an effective rate per period.) (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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