Question

A put option that expires in six months with an exercise price of $54 sells for...

A put option that expires in six months with an exercise price of $54 sells for $4.31. The stock is currently priced at $59, and the risk-free rate is 4.4 percent per year, compounded continuously. What is the price of a call option with the same exercise price?

Homework Answers

Answer #1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

As per put-call parity

P+ S = present value of X + C

P= value of put option.

S= current price of the share

X= strike price

C= value of call option.

Present value of X = X/e^r

r = risk free rate.

Given:

P= value of put option = 4.31

S= current price of share=59

X= strike price = 54

Present value of X = 54/e^(4.4%×6/12)

r = risk free rate. 4.4%

4.31+59 = 52.825+C

C= 10.485

Value/Price of call option =$10.49 (Answer).

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You are observing the following market prices. A put option that expires in six months with...
You are observing the following market prices. A put option that expires in six months with an exercise price of $45 sells for $5.80. The stock is currently priced at $40, and the risk-free rate is 3.6% per year, compounded continuously. What is the price of a call option with the same exercise prices and maturity? In the above example, suppose you form a portfolio consisting of selling a call option and buying a put option on the same stock....
You are observing the following prices. A put option that expires in six months has an...
You are observing the following prices. A put option that expires in six months has an exercise price of $45 and it sells for $5.80. The stock is currently priced at $40, and the risk-free rate is 3.6% per year, compounded continuously.    1.What is the price of a call option with the same exercise prices and maturity?    2.Suppose you form a portfolio consisting of buying the call and the put options above (Note, they are written on the...
You are observing the following prices. A put option that expires in six months has an...
You are observing the following prices. A put option that expires in six months has an exercise price of $45 and it sells for $5.80. The stock is currently priced at $40, and the risk-free rate is 3.6% per year, compounded continuously.    1.What is the price of a call option with the same exercise prices and maturity? USE CONTINOUS COMPOUNDING    2.Suppose you form a portfolio consisting of buying the call and the put options above (Note, they are...
A stock is currently selling for $60 per share. A call option with an exercise price...
A stock is currently selling for $60 per share. A call option with an exercise price of $65 sells for $3.71 and expires in three months. If the risk-free rate of interest is 2.9 percent per year, compounded continuously, what is the price of a put option with the same exercise price?
A stock is currently selling for $60 per share. A call option with an exercise price...
A stock is currently selling for $60 per share. A call option with an exercise price of $67 sells for $4.49 and expires in four months. If the risk-free rate of interest is 2.7 percent per year, compounded continuously, what is the price of a put option with the same exercise price?
A call option with an exercise price of $50 expires in six months, has a stock...
A call option with an exercise price of $50 expires in six months, has a stock price of $54, and has a standard deviation of 80 percent. The risk-free rate is 9.2 percent per year annually compounded. Calculate the value of d1.and d2 Calculate the value of d1 0.3 0.7214 -0.7214 0.4967 calculate the value of  d2 +0.0690 -0.0690 +0.5657 -0.5657
1. A put option with an exercise price of $17 that expires in 4 months is...
1. A put option with an exercise price of $17 that expires in 4 months is currently worth (costs) $3. The stock price is currently $19 and the risk free rate of return is 0.09. a) What is a call option with the same exercise price and expiry worth? b) Draw the profit diagram (at expiry) for the put option from part a.
A call option with an exercise price of $40 and three months to expiration has a...
A call option with an exercise price of $40 and three months to expiration has a price of $4.10. The stock is currently priced at $39.80, and the risk-free rate is 4 percent per year, compounded continuously. What is the price of a put option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Put option price= __________
A stock is currently selling for $81 per share. A call option with an exercise price...
A stock is currently selling for $81 per share. A call option with an exercise price of $83 sells for $4.05 and expires in three months. If the risk-free rate of interest is 3 percent per year, compounded continuously, what is the price of a put option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Put price $
A stock is currently selling for $74 per share. A call option with an exercise price...
A stock is currently selling for $74 per share. A call option with an exercise price of $79 sells for $3.70 and expires in three months. If the risk-free rate of interest is 3.4 percent per year, compounded continuously, what is the price of a put option with the same exercise price? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))   Put price $   
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT