Consider a one-year maturity call option and a one-year put option on the same stock,both with striking price $45.If the risk-free rate is 4%,the stock price is $48,and the put sells for $1.50,what should be the price of the call?

Question

Quizplus · Accepted Answer

Using the put-call parity formula: C = P + S - PV(K), where C is the call price, P is the put price, S is the stock price, and PV(K) is the present value of the strike price. PV(K) = 45 / (1 + 0.04) = 43.27. Therefore, C = 1.50 + 48 - 43.27 = 6.23.

Consider a One-Year Maturity Call Option and a One-Year Put