A stock that pays no dividends has a price of $50.The one-month maturity,at-the-money European call and put are trading at $10 and $9.90,respectively.The one-month forward price of the stock is:
A)49.90
B)50.00
C)50.10
D)50.20

Question

Quizplus · Accepted Answer

The one-month forward price of the stock can be calculated using the put-call parity formula for European options, which is: $C - P = S - K e^{-rT}$, where $C$ is the call price, $P$ is the put price, $S$ is the current stock price, $K$ is the strike price (which equals the stock price for at-the-money options), $r$ is the risk-free interest rate, and $T$ is the time to maturity. Since the interest rate $r$ is not provided, we can simplify the formula to $C - P = S - K$. Given that $C = 10$, $P = 9.90$, and $S = K = 50$, rearranging the formula to solve for $S$ gives us $S = C - P + K = 10 - 9.90 + 50 = 50.10$.

A Stock That Pays No Dividends Has a Price of $50.The