Question

# Hennepin stock currently sells for \$38. A one-year call option with strike price of \$45 sells...

Hennepin stock currently sells for \$38. A one-year call option with strike price of \$45 sells for \$9, and the risk-free interest rate is 4%. Using put-call parity, what is the price of a one-year put with strike price of \$45 (using continuous compounding)?

Group of answer choices

a. \$9.00.

b.\$12.89.

c. \$13.77.

d. \$14.24.

e. None of the above.

#### Homework Answers

Answer #1

Solution.>

We have we have the following information for a call and a put option:

Exercise price: \$45

Call option price: \$9

Put option price: ?

Risk-free rate: 4%

Current market price: \$38

Time to maturity: 1 year

Let’s plug these values in the put-call parity equation:

Call + Exercise Price * e ( -r * t) = Put + Currrent Stock Price

9 + 45 * e^(-0.04*1) = P + 38

52.235 = P + 38

Put option price = 14.24

Hence, the correct option is (D).

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