Question: Problem # 8 I derive a two-state put option value in this problem. Data: So- 250; X-260; 1 +r 1.1. The two possibilities for Sr

Problem # 8 I derive a two-state put option value in this problem. Data: So- 250; X-260; 1 +r 1.1. The two possibilities for Sr are 280 and 180. a. The range of Sis 100 while that of P is 80 across the two states. What is the hedge ratio of the put? b-1. Form a portfolio of 4 shares of stock and 5 puts. What is the (nonrandom) payoff to this portfolio -2. What is the present value of the portfolio

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