Suppose VS's stock price is currently $20.A six-month call option on VS's stock with an exercise price of $15 has a value of $7.14.What is the price of an equivalent put option? The six-month risk-free interest rate is 5 percent per six-month period.
A)$1.43
B)$9.43
C)$8
D)$12

Question

Quizplus · Accepted Answer

Using the put-call parity formula: P = C + X/(1+r)^t - S, where P is the put price, C is the call price ($7.14), X is the exercise price ($15), r is the risk-free rate (0.05), t is the time period (0.5 years), and S is the stock price ($20). Plugging in the values, P = 7.14 + 15/(1+0.05)^0.5 - 20 = 1.43.

Suppose VS's Stock Price Is Currently $20