Data: S0 = 102; X = 115; 1 + r = 1.1. The two possibilities for ST are 146 and 84. Required: The range of S is 62 while that of P is 31 across the two states. What is the hedge ratio of the put? Form a portfolio of one share of stock and two puts. What is the (nonrandom) payoff to this portfolio? What is the present value of the portfolio? Given that the stock currently is selling at 102, calculate the put value.

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
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Data: S0 = 102; X = 115; 1 + r = 1.1. The two possibilities for ST are 146 and 84.

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  1. The range of S is 62 while that of P is 31 across the two states. What is the hedge ratio of the put?
  2. Form a portfolio of one share of stock and two puts. What is the (nonrandom) payoff to this portfolio?
  3. What is the present value of the portfolio?
  4. Given that the stock currently is selling at 102, calculate the put value.
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