You are provided with the following information on put and call options on a stock: Call price, co = $6.64 Put price, po = $2.75 Exercise price, X = $30 Days to option expiration = 219 Current stock price, So = $33.19 Put-call parity shows the equivalence of a call bond portfolio (fiduciary call) and a put underlying portfolio (protective put). Illustrate put-call parity assuming stock prices at expiration (ST) of $20 and of $40. Assume that the risk-free rate, r, is 4 percent.

You are provided with the following information on put and call options on a stock: Call price, co = $6.64 Put price, po = $2.75 Exercise price, X = $30 Days to option expiration = 219 Current stock price, So = $33.19 Put-call parity shows the equivalence of a call bond portfolio (fiduciary call) and a put underlying portfolio (protective put). Illustrate put-call parity assuming stock prices at expiration (ST) of $20 and of $40. Assume that the risk-free rate, r, is 4 percent.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 3Q

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