Given an exercise price,E,time to maturity,t,and European put-call parity,the present value of the strike price plus the value of the call option on the stock is equal to the

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Quizplus · Accepted Answer

European put-call parity states that the present value of the strike price plus the value of the call option on the stock is equal to the price of the stock plus the price of the put option. Therefore, option A is correct. Option B is incorrect because it subtracts the put option, whereas the parity formula adds it. Option C is incorrect because it subtracts the market value of the stock, which is not included in the parity formula. Option D is incorrect because it refers to a risk-free security, which is not included in the parity formula. Option E is also incorrect because it only refers to the market value of the stock, which is only one component in the parity formula.

Given an Exercise Price,E,time to Maturity,t,and European Put-Call Parity,the Present