Chapter 21, Problem 28PS

a)

Summary Introduction

To determine: Risk (beta) of the call based on one step model.

b)

Summary Introduction

To determine: Risk (beta) of put based on one step model.

c)

Summary Introduction

To determine: Beta of portfolio if person X buy one share and invest the present value of exercise price in loan.

d)

Summary Introduction

To determine: Beta of portfolio if person X buy one share and one put option.

e)

Summary Introduction

To discuss: Whether the answers of part (c) and part (d) are same.