Question

a stock is currently selling for $73 per share. a call option with an exercise price of $70 sells for $5.27 and expires in three months. if the risk-free rate of interest is 2.6 percent per year, compounded continuously, what is the price of a put option with the same exercise price? (do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

To calculate the price of a put option with the same exercise price, we can use the put-call parity formula.

Step-by-step explanation:

To calculate the price of a put option with the same exercise price, we can use the put-call parity formula:

Put Option Price = Call Option Price + Exercise Price - Stock Price + Present Value of Dividends

In this case, the exercise price is $70 and the Call Option Price is $5.27, so the Put Option Price = $5.27 + $70 - $73 + Present Value of Dividends

Since the question does not provide any information about dividends, we can assume there are no dividends, so the Present Value of Dividends is 0.

Therefore, the price of the put option with the same exercise price is $2.27.