THE BINOMIAL OPTION PRICING MODEL PART II Answer questions #10- #15 based on the following information. The current stock price is 100 and the risk-free rate each period is 5% We have a two-state, two-period world (i.e. there are time periods to A European call option on this stock with an exercise price of 90 expires the end of the second period. 10. The current price of the call is about a. 16.68 b. 17.42 c. 18.89 d. 19.22 e. 20.01 11. The initial (t=0) hedge ratio is about a. 0.22 b. 0.32 c. 0.65 d. 0.89 e. 1.00 12. The two hedge ratios at t=l are about: a. impossible to estimate since there is only one hedge ratio at t=1 b. 1.00 and 0.75 c. 0.00 and 0.25 d. 1.00 and 0.50 e. 0.00 and 0.33 13. If we initially wrote I call, then the value of the hedged portfolio one period later would be closest to: a. $62.65 b. $73.65 c. $84.65 d. $89.65 e. $96.65 THE BINOMIAL OPTION PRICING MODEL PART II Answer questions #10- #15 based on the following information. The current stock price is 100 and the risk-free rate each period is 5% We have a two-state, two-period world (i.e. there are time periods to A European call option on this stock with an exercise price of 90 expires the end of the second period. 10. The current price of the call is about a. 16.68 b. 17.42 c. 18.89 d. 19.22 e. 20.01 11. The initial (t=0) hedge ratio is about a. 0.22 b. 0.32 c. 0.65 d. 0.89 e. 1.00 12. The two hedge ratios at t=l are about: a. impossible to estimate since there is only one hedge ratio at t=1 b. 1.00 and 0.75 c. 0.00 and 0.25 d. 1.00 and 0.50 e. 0.00 and 0.33 13. If we initially wrote I call, then the value of the hedged portfolio one period later would be closest to: a. $62.65 b. $73.65 c. $84.65 d. $89.65 e. $96.65