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.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 5MC: In 1973, Fischer Black and Myron Scholes developed the Black-Scholes option pricing model...

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