Use the Two-State Put-Option Value in This Problem

question 43

Multiple Choice

Use the two-state put-option value in this problem. S_O = $100; X = $120; the two possibilities for S_T are $150 and $80. The range of P across the two states is _____, and the hedge ratio is _______.

• A) $0 and $40; −4/7
• B) $0 and $50; +4/7
• C) $0 and $40; +4/7
• D) $0 and $50; −4/7
• E) $20 and $40; +1/2

---

Definitions:

Financial Manager

A professional responsible for managing the financial health of an organization by developing strategies and plans for the long-term financial goals of their organization.

Accounting System

A structured process of collecting, recording, summarizing, and reporting financial transactions to oversee a company's financial health.

Operating Budgets

Detailed projections of income and expenses associated with the daily operations of a company over a specific period.

Financial Control

The management of a company's expenses, income, and assets in order to increase profitability and ensure stability and compliance with financial regulations.