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In: Finance

5. J-Rata Corp shares are currently trading at $30 each. It is expected to increase by...

5. J-Rata Corp shares are currently trading at $30 each. It is expected to increase by 10% or decrease by 6% during the next two-three months. If its strike price at maturity in six months is set as $32 and the risk free rate is 8% per annum for all maturities:

(a) calculate its call options price and its put option price currently.

(b) Test and prove that the put-call parity is holding based on your option pricing.

Solutions

Expert Solution

As per put call parity
Call price + PV of exercise price = Spot price + Put price
2.9179+32*e^(-0.08*0.5)=30+Put value
Put value = 3.6632

jeff jeffy answered 2 years ago
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