The current price of a stock is $30, and at the end of one year its price will be either $35 or $25. The annual risk-free rate is 5.0%. A 1-year call option on the stock, with an exercise price of $32, is available. Based on the binominal model, what is the hedging ratio?

a. 0.2

b. 0.3

c. 0.4

d. 0.5

e. 0.6

What is the amount of borrowing in the replicating portfolio (using daily compounding, 365 days in a year)?

a. $7.13

b. $7.31

c. $8.77

d. $10.67

e. $11.62

What is the option's value (using daily compounding)?

a. $1.43

b. $1.60

c. $1.87

d. $2.01

e. $2.23