We will derive a two-state put option value in this problem. Data: S₀ = 120; X = 130; 1 + r = 1.1. The two possibilities for S_T are 140 and 90.

a.	The range of S is 50 while that of P is 40 across the two states. What is the hedge ratio of the put?(Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

Hedge ratio

b-1.	Form a portfolio of 4 shares of stock and 5 puts. What is the (nonrandom) payoff to this portfolio?(Round your answer to 2 decimal places.)

Nonrandom payoff

$

b-2.	What is the present value of the portfolio? (Round your answer to 2 decimal places.)

Present value

$

c.	Given that the stock currently is selling at 120, calculate the put value. (Round your answer to 2 decimal places.)

Put value

$