Chapter 16, Problem 6PS

Reconsider the determination of the hedge ratio in the two-state model (Section $\text{16}.\text{2}$ ), where we showed that one-third share of stock would hedge one option. What would be the hedge ratio for each of the following exercise prices: $\left(\text{a}\right)\$\text{12}0\left(\text{b}\right)\$\text{11}0\left(\text{c}\right)\$\text{1}00\left(\text{d}\right)\$\text{9}0$ ? What do you conclude about the hedge ratio as the option becomes progressively more in the money? $\left(\text{LO 16}-\text{5}\right)$