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The current price of a stock is $35, and the annual risk-freerate is 4%. A...

The current price of a stock is $35, and the annual risk-free rate is 4%. A call option with a strike price of $31 and with 1 year until expiration has a current value of $6.24. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Do not round intermediate calculations. Round your answer to the nearest cent.

Solutions

Expert Solution

Value of the call + PV of the strike price = Spot price of the share + Value of the put

Given

Value of the call = 6.24

Spot price of the share = $35

So,

6.24+ 31*e-0.04 = 35+Value of the put

Value of the put = (6.24+31*e-0.04)-35

Value of the put = (6.24+31*0.9608)-35

                                = (6.24+29.7848)-35

                                = 36.0248 – 35

Value of the put = $1.0248

jeff jeffy answered 2 years ago
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