Answer must be A, B, or C to be correct. Please explain. Thank you. Given the fo
ID: 2711408 • Letter: A
Question
Answer must be A, B, or C to be correct. Please explain. Thank you.
Given the following parameters use put-call parity to determine the price of a put option with the same exercise price.
Current stock price: $48.00
Call option exercise price: $50.00
Sales price of call options: $3.80
Months until expiration of call options: 3
Risk free rate: 2.6 percent
Compounding: continuous
A.) Price of put option = $4.52
B.) Price of put option = $6.13
C.) Price of put option = $5.48
Explanation / Answer
As per put call parity
P = C - S + Xe^ -rt
=3.8 - 48 + 50 e ^ -0.026*0.25
=3.8 - 48 + 49.676
=5.476
Answer 5.48 c