1.

1. The interest rate is 3.5% per year. The stock price of SZD is currently $100 and it pays no dividends. The stock price a year from now will be either $138 or $61. You sell your client a call option on SZD with a strike price of $129 and an expiration date 1 year from now. The number of shares of SZD purchased to hedge each call option (i.e. the hedge ratio) is __________.

   		0.38
   		0.88
   		0.49
   		1.10
   		None of the above

2. The interest rate is 4% per year. The stock price of PLGG is currently $51 and it pays no dividends. The stock price a year from now will be either $72 or $47. You sell your client a call option on PLGG with a strike price of $58 and an expiration date 1 year from now. What is the hedge ratio of this call option?

   		0.20
   		0.44
   		0.68
   		0.84
   		None of the above