Reconsider the determination of the hedge ratio in the two-state model (Section 16.2), where we showed that one-third share of stock would hedge one option.

a.	Assuming a stock price of $210, what would be the hedge ratio for each of the following exercise prices: $210, $180, $150, $120? (Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places.)

X		Hedge Ratio
$	210
$	180
$	150
$	120

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