You want to buy a stock that is currently selling for $50. You forecast that in one year, the stock's price will be either $106 or $12, with equal probabilities. There is a one-year call option on the stock available with an exercise price of $80. You are able to borrow at a rate of 6.50%. You would like to hedge your stock position using the call option.

a.What will be the call's value if the stock price is $106 in one year? What will be the call's value if the stock price is $12 in one year?(Round your answers to the nearest dollar.)

Call value at $106 ?

Call value at $12 ?

b.What is the hedge ratio you should use?(Round your answer to 4 decimal places.)

Hedge ratio

c.Assume that you can purchase fractional shares of stock. How many shares of stock would you buy?(Round your answer to 4 decimal places.)

Shares