J&N stock has a current market price of $51.97 a share and the annual risk-free rate is 4.2 percent, compounded continuously. The 1-year call on this stock with a strike price of $55 is priced at $2.30. What is the price of the one-year put with a strike price of $55?
A) $3.07
B) $2.86
C) $3.22
D) $2.94
E) $2.99

Question

Quizplus · Accepted Answer

The correct answer is A.The put-call parity formula is:S + P - K * e^(-r * t) = Cwhere:S is the current stock priceP is the put priceK is the strike pricer is the risk-free ratet is the time to expirationSubstituting the given values into the formula, we get:51.97 + P - 55 * e^(-0.042 * 1) = 2.30P = 3.07

J&N Stock Has a Current Market Price of $51