Reconsider the determination of the hedge ratio in the two$-$state model where we showed that one$-$third share of stock would hedge one option. The possible end$-$of$-$year stock prices, $u{S}_0=$$$150($up state$)$ and $d{S}_0=$$$123($down state$).$

a$.$ What would be the call option hedge ratio for each of the following exercise prices: $$150,$$$145,$$$140,$ $$123,$ given the possible endof$-$year stock prices, $u{S}_0=$$$150($up state$)$ and $d{S}_0=$$$123($down state$)?($Round your answers to $3$ decimal places.$)$

$\backslash$table$[[\backslash$table$[[$Exercise$],[$Price$]],$Hedge Ratio$],[$$$,150,],[$$$,145,],[$$$,140,],[$$$,123,]]$

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

Increases to a maximum of $1\mathrm{.}0$

Decreases to a minimum of $0$