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  3. 4.2.1-5. consider the following information on a c

4.2.1-5. Consider the following information on a call option: Sto = 52.23 X = 50...

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4.2.1-5. Consider the following information on a call option: Sto = 52.23 X = 50 u= 1.33 d = 0.74 r = 0.03 Using Excel spreadsheet, please calculate the underlying stock prices for time 1 and 2, and find out the call prices in time periods 2, 1, and 0. What is the current time hedge ratio? b. How will the ratio change if the stock price moves up/down in time period 1? e. What is the value of the hedge portfolio at times 0, 1, and 2? Show that at each time the portfolio indeed grows at the risk-free rate of 3%. a

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