a. If, in a two-state model, a stock can take a price of 128 or 96, what would be the hedge ratio for each of the following prices: $128, $120, $110, $96? (Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places.)

X		Hedge Ratio
$	128
$	120
$	110
$	96

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
	Decreases to a minimum of 0