Question: PLEASE ANSWER ALL THIS IS ONE QUESTION WITH SUB PART ANSWER COMPLETELY OR THUMBS DOWN We will derive a two-state put option value in this

PLEASE ANSWER ALL

THIS IS ONE QUESTION WITH SUB PART

ANSWER COMPLETELY OR THUMBS DOWN

PLEASE ANSWER ALL THIS IS ONE QUESTION WITH SUB PART ANSWER COMPLETELY OR THUMBS DOWN We will derive a two-state put option value in

We will derive a two-state put option value in this problem. Data: S0=$110;X=$120;1+r=1.10. The two possibilities for ST are $140 and $100. Required: a. The range of S is $40 while that of P is $20 across the two states. What is the hedge ratio of the put? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) b. Form a portfolio of two shares of stock and four puts. What is the (nonrandom) payoff to this portfolio? (Round your answer to 2 decimal places.) c. What is the present value of the portfolio? (Round your answer to 2 decimal places.) d. Given that the stock currently is selling at $110, calculate the put value. (Do not round intermediate calculations and round your answer to 2 decimal places.)

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