Answered

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A stock is currently selling for $67 per share. A call option with an exercise price of $70 sells for $3.21 and expires in three months. If the riskfree rate of interest is 2.6 percent per year, compounded continuously, what is the price of a put option with the same exercise price

Sagot :

abiolataiwo2015

Answer:

$5.76

Explanation:

Calculation to determine the price of a put option with the same exercise price

We would be Using put-call parity and solving for the put price

$67 + P = $70e^–(.026)(3/12)+ $3.21

$67 + P = $70e^–(.026)(.25)+ $3.21

$67 + P =190.2797^–(0.0065)+ $3.21

$67 + P =$69.5465+ $3.21

$67 + P =$72.7565

P=$72.7565-$67

P=$5.7565

P=$5.76 (Approximately)

Therefore the price of a put option with the same exercise price will be $5.76

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