Question: We will derive a two-state call option value in this problem. Data: so = 200; X = 210; 1 + r= 1.1. The two possibilities

We will derive a two-state call option value in this problem.

We will derive a two-state call option value in this problem. Data: so = 200; X = 210; 1 + r= 1.1. The two possibilities for St are 230 and 180. a. The range of Sis 50 while that of C is 20 across the two states. What is the hedge ratio of the call? (Round your answer to 2 decimal places.) Hedge ratio b. Calculate the value of a call option on the stock with an exercise price of 210. (Do not use continuous compounding to calculate the present value of X in this example, because the interest rate is quoted as an effective per-period rate.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Call value

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