Form a portfolio of 3 shares of stock and 5 put options, Financial Management

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Form a portfolio of 3 shares of stock and 5 put options

1. Consider the following: S0 = 100; X = 110; rf = 10%; The two possibilities for ST are 130 and 80. What is the hedge ratio of a put option?

2. Consider the question above: Form a portfolio of 3 shares of stock and 5 put options. What is the nonrandom payoff to this portfolio?

3. Consider the above: What is the present value of the portfolio?

4. Given that the stock is currently selling for 100, what is the value of the put option?

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Financial Management: Form a portfolio of 3 shares of stock and 5 put options

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Financial Management: Form a portfolio of 3 shares of stock and 5 put options

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