A stock priced at $50 has two possible outcomes, either increases to $60 or decreases to $42. If the stock goes up, the payoff of the stock's call option = S5. But, if the stock price declines to $42, the calls will expire worthless. Given these two possible outcomes, what is the Hedge Ratio of the Call option? Round your answer to two decimals. The listed correct answer was 0.28. I could not find a way to get this.
A stock priced at $50 has two possible outcomes, either increases to $60 or decreases to $42. If the stock goes up, the payoff of the stock's call option = S5. But, if the stock price declines to $42, the calls will expire worthless. Given these two possible outcomes, what is the Hedge Ratio of the Call option? Round your answer to two decimals. The listed correct answer was 0.28. I could not find a way to get this.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A stock priced at $50 has two possible outcomes, either increases to $60 or decreases to $42. If the stock goes up, the payoff of the stock's call option = S5. But, if the stock price declines to $42, the calls will expire worthless. Given these two possible outcomes, what is the Hedge Ratio of the Call option? Round your answer to two decimals. The listed correct answer was 0.28. I could not find a way to get this.
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