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 _____ 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

Question

Quizplus · Accepted Answer

When S_T = $150; P = $0; when S_T = $80: P = $40; ($0 - $40)/($150 - $80) = -4/7.

Use the Two-State Put Option Value in This Problem