We will derive a two-state put option value in this problem. Data:S₀= 180;X= 190; 1 +r= 1.1. The two possibilities forS_Tare 210 and 110.

a.The range ofSis 100 while that ofPis 80 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 180, calculate the put value.(Round your answer to 2 decimal places.)

Put value$