You are evaluating the stock options of GOOG. The underlying stock GOOG is sold at $400 per share today. Currently, the risk-free rate you can borrow/lend is 5% per year. You are interested in a call option that expires 1 year from now and has a strike price of 420 . Your broker also convinces you the stock price of GOOG will only have two possible outcomes a year from now: Part 1 (15 points) a. (7 points) What is the hedge ratio? b. (8 points) Briefly state your alternative portfolio. What is the no-arbitrage price of the option? Part 2 (5 points) After researching the most up-to-date market information, your broker figured out the possible outcomes of GOOG stock price a year from now have changed to: Without calculation, discuss how the price of the call option from part 1 would change (that is, would the price of the same call option be higher than/lower than/equal to the price you get from You are evaluating the stock options of GOOG. The underlying stock GOOG is sold at $400 per share today. Currently, the risk-free rate you can borrow/lend is 5% per year. You are interested in a call option that expires 1 year from now and has a strike price of 420 . Your broker also convinces you the stock price of GOOG will only have two possible outcomes a year from now: Part 1 (15 points) a. (7 points) What is the hedge ratio? b. (8 points) Briefly state your alternative portfolio. What is the no-arbitrage price of the option? Part 2 (5 points) After researching the most up-to-date market information, your broker figured out the possible outcomes of GOOG stock price a year from now have changed to: Without calculation, discuss how the price of the call option from part 1 would change (that is, would the price of the same call option be higher than/lower than/equal to the price you get from