Final answer:
According to the put-call parity, the put price must be $4.
Step-by-step explanation:
The correct answer is C. 4.The put-call parity is a fundamental concept in options pricing that states that the sum of the call price and the present value of the strike price equals the sum of the put price and the present value of the underlying asset. In this case, the call price is $3 at a strike of $10, and the underlying stock price is $11. Using the put-call parity, we can calculate the put price as follows: Put price + (Strike price / (1 + Interest rate)) = Call price + Stock price Put price + (10 / (1 + 0)) = 3 + 11 Put price + 10 = 14 Put price = 14 - 10 = 4
Therefore, according to the put-call parity, the put price must be $4. the relationship between the prices of European put and call options with the same strike price and expiration date is given by the formula: Call Price + Strike Price × e^(-Interest Rate × Time) = Put Price + Stock Price In this scenario, we have a call price of $3, a strike price of $10, a current stock price of $11, and an interest rate of 0%. No dividends are paid.