Question: We will derive a two-state put option value in this problem. Data: S0 = 160; X= 170; 1 + r 1.1. The two possibilities for

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 = 160; X= 170; 1 + r 1.1. The two possibilities for ST are 190 and 110. a. The range of S is 80 while that of P is 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 160, calculate the put value. (Round your answer to 2 decimal places.) Put value $

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