Use your 2-step Binomial tree in Excel (with Cox-Ross-Rubinstein model for U and D).

S(0) = 125.00

rf = 1.25%

sigma = 35%

T=1/12

K = 130

Use the European Call option

(a) At time zero, what is the hedge factor (or Delta) for this option? (Show your calculations)

(b) From time zero, suppose you go up once in the tree. At t=T-1, what is the new hedge factor (or Delta) of the option? (Show your calculations)