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

Question

Quizplus · Accepted Answer

B) Use the put-call parity relationship:
stock price + put price = call price + PV(strike price)
$140 +put price = $15 + $150/1.05
put price = $17.86

Suppose You Are Looking to Exploit Opportunities in the Options