A stock price is currently $40. It is known that at the end of the next two 3-months it is expected to go up by 12.5% or down by 12.5%. The risk-free rate of interest with quarterly compounding is 8% per annum. a Calculate the value of a six-month European put option on the stock with an exercise price of $42. b. What is the hedge ratio at time 0? c. What are the two possible hedge ratios at the end of the first 3-month