Day's End stock is selling for $43 a share. The 6-month call with a strike price of $45 is priced at $.30. Risk-free assets are currently returning 4.1 percent per year, compounded continuously. What is the price of a 6-month put with a strike price of $45?
A) $1.39
B) $1.46
C) $1.28
D) $1.51
E) $1.32

Question

Quizplus · Accepted Answer

Using the put-call parity formula: P = C + PV(X) - S, where P is the put price, C is the call price ($0.30), PV(X) is the present value of the strike price ($45) discounted at the risk-free rate, and S is the stock price ($43). Calculate PV(X) = $45 * e^(-0.041*0.5) = $44.08. Then, P = $0.30 + $44.08 - $43 = $1.38, which rounds to $1.39.

Day's End Stock Is Selling for $43 a Share