Suppose you are looking to exploit opportunities in the options markets. The price of a call option on Massive Industries with a maturity of one year and an exercise price of $150 is $15, and the share price is $140. What should the price of a put option be to preclude profitable opportunities? The risk-free rate of interest is 5%.
A)$17.86
B)$21.45
C)$25.00
D)$19.63

Question

Quizplus · Accepted Answer

According to the put-call parity, C + PV(X) = P + S, where C is the call price, PV(X) is the present value of the exercise price, P is the put price, and S is the stock price. Solving for P: P = C + PV(X) - S = $15 + ($150 / 1.05) - $140 = $17.86.

Suppose You Are Looking to Exploit Opportunities in the Options