Question: We will derive a two-state put option value in this problem, Data: S0 = 220; X = 230; 1 + r = 1.1. The two

We will derive a two-state put option value in this problem,

We will derive a two-state put option value in this problem, Data: S0 = 220; X = 230; 1 + r = 1.1. The two possibilities for ST are 250 and 150. a. The range of S is 100 while that of P 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 230. (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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