We will derive a two-state call option value in this problem. Data:S₀= 240;X= 250; 1 +r= 1.1. The two possibilities forS_Tare 270 and 170.

a.The range ofSis 100 while that ofCis 20 across the two states. What is the hedge ratio of the call?(Round your answer to 2 decimal places.)

Hedge ratio

b.Calculate the value of acalloption on the stock with an exercise price of 250. (Do not use continuous compounding to calculate the present value ofXin this example, because the interest rate is quoted as an effective per-period rate.)(Do not round intermediate calculations.Round your answer to 2 decimal places.)

(having trouble with part B)