Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Data: 5o = 104; X = 116; 1 + r = 1.12. The two possibilities for St are 194 and 90. a. The range of

image text in transcribed

Data: 5o = 104; X = 116; 1 + r = 1.12. The two possibilities for St are 194 and 90. a. The range of Sis 104 while that of Pis 26 across the two states. What is the hedge ratio of the put? (Round your answer to 2 decimal places. Negative value should be indicated by a minus sign.) Hedge ratio 0.68 > b. Form a portfolio of one share of stock and four puts. What is the (nonrandom) payoff to this portfolio? Nonrandom payoff $ 194 c. What is the present value of the portfolio? (Round your answer to 2 decimal places.) Present value $ 173.21 d. Given that the stock currently is selling at 104, calculate the put value. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Put value $ 17.30

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance And Financial Markets

Authors: Keith Pilbeam

2nd Edition

1403948356, 978-1403948359

More Books

Students also viewed these Finance questions