Question

The current stock price is $129 and put price is $6. The risk-free interest rate is 10% per annum continuously compounded. Using the put-call parity, calculate the call price. The strike is $105 and the maturity is 0.5 year for both put and call.

Answer 1

Answer:-

The formula for Put-call parity is given by:-

Where, C is the call option price

P is the Put option price

S is the Stock price

K is the Strike price of put and call

r is the Risk-free interest rate

t is the time to expiration

The following informations are given in the question:-

Stock price (S) = $ 129

Put price(P) = $ 6

Risk-free interest rate (r) = 10 %

Strike price (K) = $105

Time to maturity (t) = 0.5 year

The call price can be determined using the above formula:

C = 135 - (105 / 1.0488)

C = $ 34.89

Hence, the Call price is $ 34.89