Consider the following data for a European option: Expiration = 6 months; Stock price = $80; Exercise price = $75; Call option price = $12; Risk-free rate = 5% per year.Using put-call parity,calculate the price of a put option having the same exercise price and expiration date.
A)$3.07
B)$5.19
C)$11.43
D)$3.42Value of put = value of call - share price + PV of exercise price

Question

Quizplus · Accepted Answer

Using put-call parity, we have:

Put price + Share price = Call price + PV of exercise price
Put price + $80 = $12 + PV($75)
Put price = $5.19 (rounded to nearest cent)

Consider the Following Data for a European Option: Expiration =