A stock is priced at $52.90 a share, the 3-month $45 call is priced at $9.31 a share, and the risk-free rate is 4.5 percent, compounded continuously. What is the value of the 3-month put with a strike price of $45?
A) $.57
B) $.63
C) $.91
D) $1.36
E) $1.54

Question

Quizplus · Accepted Answer

We can use the put-call parity formula:

Put price + Stock price = Call price + Present value of strike price

Solving for the put price, we have:

Put price = Call price + Present value of strike price - Stock price
Put price = $9.31 + e^(-0.045*0.25)*$45 - $52.90
Put price = $0.91

Therefore, the value of the 3-month put with a strike price of $45 is $0.91, which corresponds to choice C.

A Stock Is Priced at $52