Calculate the hedge ratio.

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Learning Goal: I’m working on a finance question and need a reference to help me learn.Instructions – PLEASE READ THEM CAREFULLYThe Assignment must be submitted on Blackboard (WORD format only) via allocated folder.Assignments submitted through email will not be accepted.Students are advised to make their work clear and well presented; marks may be reduced for poor presentation. This includes filling your information on the cover page.Students must mention question number clearly in their answer.Late submission will NOT be accepted.Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks.All answered must be typed using Times New Roman (size 12, double-spaced) font.Submissions without cover page will NOT be accepted. Assignment 1Submission Date by students: End of week-7 (12/03/2022 )-11:59 PMPlace of Submission: Students Grade Centre via blackboard.Marks: 10 MarksAssignment Purposes/Learning Outcomes: LO 1. Recognize call and put options and their use in investment management. LO 2. Describe trading strategy which incorporates the use of call and put options. Assignment Question(s): (Marks 10) Q-1. The current stock price be SAR 50 and that can go up or down by 20 percent per period. The risk-free rate is 10 percent. Use one binomial period. (5 Marks) a) Determine the two possible stock prices for the next period. (1 Mark) b) Determine the intrinsic values at expiration of a European call option with an exercise price of SAR 45. (1.5 Marks)c) Find the value of the option today. (1.5 Marks)d) Calculate the hedge ratio. (1 Mark)Q-2. Explain the concept of moneyness? (3 Marks)Q-3. Explain the Options and discuss the difference between American and European options.Q-4. Derivatives are used to manage financial risk. Do you agree? (100-150 Words)
Requirements: non limited

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