The price of a European call option on a non-dividend-paying stock with a strike price of $50 is $6.The stock price is $51,the continuously compounded risk-free rate (all maturities)is 6% and the time to maturity is one year.What is the price of a one-year European put option on the stock with a strike price of $50?
A) $9.91
B) $7.00
C) $6.00
D) $2.09

Question

Quizplus · Accepted Answer

Put-call parity is c+Ke^-^rT=p+S₀.In this case K=50,S₀=51,r=0.06,T=1,and c=6.It follows that p=6+50e^-0.06×1−51 = 2.09.

The Price of a European Call Option on a Non-Dividend-Paying