Consider a Binomial World in Which the Current Stock Price

question 22

Multiple Choice

Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent.The risk-free rate is 4 percent.Assume a one-period world.Answer questions 12 through 15 about a call with an exercise price of 80.
-What is the hedge ratio?

• A)0.429
• B)0.714
• C)0.571
• D)0.823
• E)none of the above

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Hypertension

A chronic medical condition where the blood pressure in the arteries is persistently elevated, often leading to increased risk of heart disease, stroke, and other health problems.

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A condition where an individual or community lacks the financial resources and essentials for a minimum standard of living.

Unemployment

A condition where individuals who are capable of working and actively seeking work remain jobless.