Question: Use the two-state binomial option-pricing model with continuous compounding for the following questions: S 0 = $100; X = $120; r f = 5.5% The

Use the two-state binomial option-pricing model with continuous compounding for the following questions:

S0 = $100; X = $120; rf = 5.5%

The stock price will either increase to $150 (u=1.5) or decrease to $80 (d=0.8).

What is the delta (i.e., hedge ratio) for the put?

What is the probability (Pru) that the underlying stock price will experience the 'u' state? (Same as above)

Value the put using the risk-free approach.

Value the put using the risk neutral approach.

I can not figure out how to do the math I got the answers wrong on my homework and I need to know the correct calculations before I take my test.

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