You are given the following discount factors: You are told that the price of a European Call option on a 2-year ?xed rate bond paying 5% semiannually, with T =2andK = 101 is 4.6155. While the price of a European Put option with the exact same speci?cation is: 3.0500. Are the securities adequately priced?

Question

You are given the following discount factors:   You are told that the price of a European Call option on a 2-year ?xed rate bond paying 5% semiannually, with T =2andK = 101 is 4.6155. While the price of a European Put option with the exact same speci?cation is: 3.0500. Are the securities adequately priced?

Quizplus · Accepted Answer

The Answer is Yes, according to the Put-Call parity the price of the Call option should be 4.6155.

You Are Given the Following Discount Factors: You