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The price of a European call option on anon-dividend-paying stock with a strike price of...

The price of a European call option on a non-dividend-paying stock with a strike price of 50 $ is 6 $. The stock price is 51 $, the continuously compounded risk-free rate for all maturities is 6% and the time to maturity is one year. What is the price of a one-year European put option on the stock with a strike price of 50 $?

Solutions

Expert Solution

Current value (S) $51
Riskless interest rate r 6.00%
Strike price K $50
Expiration (T) = 1
Call option (C)] 6
Put-call parity = c+Ke-rT=p+S0
Put-call parity = 6+ $50 e-6% x1 =p+51
p=6+50e-0.06×1−51 2.09

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