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Consider a two-state call option valuation problem given the current stock price $240 and the two...

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Finance

Consider a two-state call option valuation problem given thecurrent stock price $240 and the two possibilities for the changein the price are $270 and $170. Also, the strike price is $250 andthe risk-free rate is 10%. a) What is the hedge ratio of the call?b) Calculate the value of a 1-year call option using discretecompounding. show all steps and formula please

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Step 1 Calculate the option value at expiration based upon your assumption of a 50 chance of increasing to 270and a 50 chance of decreasing to 170 The two    See Answer
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