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You are attempting to value a call option with an exercise price of $108 and one...

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Finance

You are attempting to value a call option with an exercise priceof $108 and one year to expiration. The underlying stock pays nodividends, its current price is $108, and you believe it has a 50%chance of increasing to $133 and a 50% chance of decreasing to $83.The risk-free rate of interest is 9%. Calculate the call option’svalue using the two-state stock price model.

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Calculate the calloption valueGiven dataExercise price X 108Time to expiration T 1 yearCurrent price of stock 108Value of stock when price goes up 133Value of stock when price goes down 83Riskfree interest rate 9 009Calculate the hedge ratioHedge ratio is the    See Answer
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