### Option Pricing ProblemIn this exercise, you are given the following conditions for options pricing:- A **put option** and a **call option** both have an exercise price of **$55** and three months until expiration.- The put option sells for **$1.15**, while the call option sells for **$5.30**.- The **risk-free rate** is **4.2% per year**, compounded continuously.**Task:** Calculate the current stock price.**Instructions:** - Do not round intermediate calculations.- Round your final answer to **two decimal places** (e.g., 32.16).**Input Field:** - **Current stock price**: [Input Box]

According to Put call parity theory there is certain relationship between Put,Call and stock price of the share.If we purchase a share and a put or if we buy a call and have a cash equal to ( K* PV factor) then result will be same.Exercise price ( K ) = $55Put price =$1.15Call price =$5.30Interest rate =4.20% P.aPeriod = 3 MonthCurrent price of stock = $58.58 ( Rounded off two decimal place)

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A put option and a call option with an exercise price of $55 and three months to expiration sell for $1.15 and $5.30, respectively. If the risk-free rate is 4.2 percent per year, compounded continuously, what is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current stock price

A put option and a call option with an exercise price of $55 and three months to expiration sell for $1.15 and $5.30, respectively. If the risk-free rate is 4.2 percent per year, compounded continuously, what is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current stock price

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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