--%>

Determine value of put option with same strike & expiration

Stock price is $98; and European call option struck at $100 along with an expiration of nine months has a value of $9.07. There nine-month, compounded continuously, interest rate is 4.5%. So find out the value of the put option with the same strike and expiration?

E

Expert

Verified

The expression of find out Put–call parity is:

Call price–Put price = Stock price– Strike price x (present valued from expiration)).

By rearranging the given expression we get

Put price = 9.07 − 98 + 100 e−0.045×0.75

= 7.75.

Hence the put must be worth $7.75.

   Related Questions in Financial Management

  • Q : Add random numbers When you add random

    When you add random numbers and get normal, what occurs when you multiply them?

  • Q : Financing costs included into the

    Financing costs included into the capital budgeting analysis process. Explain.

  • Q : Tabulate advantages of the flexible

    Tabulate the advantages of the flexible exchange rate regime. The advantages of the flexible exchange rate system comprise: (I) automatic attainment of balance of payments equilibrium and (ii) maintenance of national policy autonomy.

  • Q : Implicit SF-$ exchange rate at maturity

    Consider 8.5 % Swiss franc/U.S. dollar dual currency bonds which pay $666.67 at maturity per SF1,000 of par value.  Describe implicit SF/$ exchange rate at maturity?  Will the investor be better or worse off at maturity if the real SF/$ exchange rate

  • Q : FM Based on the information below,

    Based on the information below, calculate the weighted average cost of capital. Great Corporation has the following capital situation. Debt: One thousand bonds were issued five years ago at a coupon rate of 10%. They had 25-year terms and $1,000 face values. They are now selling to yield 9%. Th

  • Q : Question on optimal weights Assume you

    Assume you are interested in investing in the stock markets of 7 countries that means France, Canada, Japan, Germany, Switzerland, the United Kingdom, and the United States. Particularly, you would like to solve out for the optimal (tangency) portfolio compris

  • Q : Dual-Currency Bonds What should a

    What should a borrower consider before issuing dual-currency bonds? What should an investor consider before investing in dual-currency bonds?

  • Q : Explain concept of company debt

    Who introduced the concept of company’s debt associated to the strike price and the maturity of the debt?

  • Q : Financial ratio analysis Why financial

    Why financial ratio analysis requires trend analysis and industry comparison?

  • Q : SEU (surplus economic unit) and DEU

    What can a financial institution frequently do for a surplus economic unit that it would encompass difficulty doing for itself if the SEU (surplus economic unit) were to deal directly with a DEU (deficit economic unit)?