a. If, in a two-state model, a stock can take a price of 152 or 114, what would be the hedge ratio for each of the following prices: $152, $150, $140, $114? (Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places.)

X Hedge Ratio

$ 152

$ 150

$ 140

$ 114

b. What do you conclude about the hedge ratio as the option becomes progressively more in the money?

Increases to a maximum of 1.0

OR

Decreases to a minimum of 0