Now Extend the One-Period Binomial Model to a Two-Period World

question 6

Multiple Choice

Now extend the one-period binomial model to a two-period world.Answer questions 16 through 18.
-What is the hedge ratio if the stock goes down one period?

• A)0.00
• B)0.0725
• C)1.00
• D)0.73
• E)none of the above

---

Definitions:

Human Capital

Human capital refers to the set of skills, knowledge, abilities, and attributes embodied in individuals that can be utilized to create economic value.

Financial Assets

Financial assets are intangible assets representing ownership of value, such as stocks, bonds, or bank deposits.

Compensating Differential

A difference in wage rates designed to offset the desirability or undesirability of a job, based on its non-monetary characteristics.

Loading Dock

A platform or area at a warehouse, building, or facility where goods are loaded onto or from vehicles or shipping containers.