1. Characterize the behavior of the hedge ratio (for a European call option) in the limit as it gets farther in the money and as it gets farther out of the money.
2. Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .25 ? .13 Boom .75 .25 Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return %.