You are attempting to value a call option with an exercise price of $109 and one year to expiration. The underlying stock pays no dividends, its current price is $109, and you believe it has a 50% chance of increasing to $133 and a 50% chance of decreasing to $85. The risk-free rate of interest is 9%. Calculate the call option's value using the two-state stock price model. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

call-option value

Data: S₀ = 120; X = 126; 1 + r = 1.05. The two possibilities for S_T are 150 and 102. a-1. The range of S is 48 while that of C is 24 across the two states. What is the hedge ratio of the call? (Round your answer to 2 decimal places.) Hedge ratio=? a-2. Calculate the value of a call option on the stock with an exercise price of 126. (Do not use continuous compounding to calculate the present value of X in this example because we are using a two-state model here; the assumed 5% interest rate is an effective rate per period.) (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Call value