Question 1 A non – dividend – paying stock with a current price of £52, the...

Question 1

A non – dividend – paying stock with a current price of £52, the strike price is £50, the volatility is 30% pa, the risk free interest rate is 12% pa, and the time to maturity is 3 months?

b) Calculate the price of a put option price on this stock?

b) Calculate the price of a call option on this stock

c) Is the put-call parity of these options hold?

If possible, please provide a detailed step by step as I would like to fully understand and not just copy answers. Thank you :)

Solutions

Expert Solution

5.0574

1.5797

Put call parity states that

S+P=C+Xe^(-rt)

S+P=52+1.5797=53.5797

C+Xe^(-rt)=5.0574+50*e^(-12%*3/12)=53.5797

Hence, put call parity holds

jeff jeffy answered 1 year ago

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