Question: We will derlve a two-state put option value in this problem. Data: Sg=$110;X=$120;1r=1.10. The two possibilitles for ST are $140 and $100. Required: a. The

We will derlve a two-state put option value in this problem.

We will derlve a two-state put option value in this problem. Data: Sg=$110;X=$120;1r=1.10. The two possibilitles for ST are $140 and $100. Required: a. The range of S15$40 while that of P15$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.) b. Form a portfolio of two shares of stock and four puts. What is the (nonrandom) payoff to this portfolio? (Round your answer to 2 decimal places.) c. What is the present value of the portfolio? (Round your answer to 2 decimal places.) d. Given that the stock currently is selling at $110, calculate the put value. (Do not round intermediate calculations and round your answer to 2 decimal places.)

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