A call option has a premium of $1.95,a strike price of $45,and 3 months to expiration.The current stock price is $42.20.The stock will pay a $1.15 dividend in one month.The risk-free rate is 2.5 percent.What is the premium on a 3-month put with a strike price of $45? Assume the options are European style.
A) $2.08
B) $2.15
C) $3.32
D) $4.12
E) $5.62

Question

Quizplus · Accepted Answer

Put option price = -$42.20 + $1.15 / (1.025)^{1 / 12} + $45 / (1 + 0.025)^{3 / 12} + $1.95 = $5.62

A Call Option Has a Premium of $1