A stock is currently selling for $40.85.A 3-month call option with a strike price of $40 has an option premium of $1.30.The risk-free rate is 2 percent and the market rate is 9.5 percent.What is the option premium on a 3-month put with a $40 strike price? Assume the options are European style.
A)$0.00
B)$0.05
C)$0.15
D)$0.25
E)$0.35

Question

Quizplus · Accepted Answer

Put option price = $1.30 - $40.85 + $40/(1 + .02)^3/12 = $0.25

A Stock Is Currently Selling for $40