Answered

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A put option that expires in six months with an exercise price of $45 sells for $2.34. The stock is currently priced at $48, and the risk-free rate is 3.5 percent per year, compounded continuously. What is the price of a call option with the same exercise price

Sagot :

Answer: $6.12

Explanation:

The price of a call option with the same exercise price will be calculated thus:

According to Put-Call Parity, it should be noted that the Call Price will be:

= Put Price + Stock Price - [Exercise Price × e ^-(r × t)]

= $2.34 + $48 - [$45 × e ^ -[0.035 * (6/12)]]

= $50.34 - [$45 × 0.9827]

= $50.34 - $44.22

= $6.12

Therefore, the price is $6.12

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