Question: Option pricing: using a one step binomial tree, if price today is 30 and in 6 months the price can increase or decrease by 10%,

  1. Option pricing: using a one step binomial tree, if price today is 30 and in 6 months the price can increase or decrease by 10%, risk free rate is 4%
  1. What is the hedge ratio for a 6 month call with a strike of $32, what does this tell us?
  2. Use the hedge ratio to find todays price for the 6 month call?
  3. Find the price of a put with the same strike price?

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