Question: We will derive a two-state put option value in this problem. Data: So = 110; X = 120; 1 + r= 1.1. The two possibilities

We will derive a two-state put option value in this problem. Data: So = 110; X = 120; 1 + r= 1.1. The

We will derive a two-state put option value in this problem. Data: So = 110; X = 120; 1 + r= 1.1. The two possibilities for Stare 140 and 100. a. The range of Sis 40 while that of Pis 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.) Hedge ratio b. Form a portfolio of 2 shares of stock and 4 puts. What is the (nonrandom) payoff to this portfolio? (Round your answer to 2 decimal places.) Nonrandom payoff c. What is the present value of the portfolio? (Round your answer to 2 decimal places.) Present value d. Given that the stock currently is selling at 110, calculate the put value. (Round your answer to 2 decimal places.) Put value

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