Question: We will derive a two-state put option value in this problem. Data: S 0 = 230; X = 240; 1 + r = 1.1. The

We will derive a two-state put option value in this problem. Data:S₀= 230;X= 240; 1 +r= 1.1. The two possibilities forS_Tare 260 and 180.

a.The range ofSis 80 while that ofPis 60 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-1.Form a portfolio of 3 shares of stock and 4 puts. What is the (nonrandom) payoff to this portfolio?(Round your answer to 2 decimal places.)

Nonrandom payoff$

b-2.What is the present value of the portfolio?(Round your answer to 2 decimal places.)

Present value$

c.Given that the stock currently is selling at 230, calculate the put value.(Round your answer to 2 decimal places.)

Put value$

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