Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Textbook Question
Chapter 5, Problem 4P
Put–Call Parity
The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with a strike price of $32 and with 1 year until expiration has a current value of $6.56. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?
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Students have asked these similar questions
Suppose that a call option with a strike price of $48 expires in one year and has a current market price of $5.17. The market price of the
underlying stock is $46.25, and the risk-free rate is 1%. Use put-call parity to calculate the price of a put option on the same underlying stock
with a strike of $48 and an expiration of one year.
The price of a put option on the same underlying stock with a strike of $48 and an expiration of one year is $. (Round to the nearest cent.)
Put-Call Parity
The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with a strike price of $31 and with 1 year
until expiration has a current value of $5.58. 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.
$
The current price of a stock is $33, and the annual risk-free rate is 6%. Acall option with a strike price of $32 and with 1 year until expiration has acurrent value of $6.56. What is the value of a put option written on the stockwith the same exercise price and expiration date as the call option?
Chapter 5 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 5 - Define each of the following terms:
Option; call...Ch. 5 - Prob. 2QCh. 5 - Prob. 3QCh. 5 - Prob. 1PCh. 5 - The exercise price on one of Flanagan Companys...Ch. 5 - Black-Scholes Model
Assume that you have been...Ch. 5 - Put–Call Parity
The current price of a stock is...Ch. 5 - Prob. 5PCh. 5 - Binomial Model The current price of a stock is 20....Ch. 5 - Prob. 7P
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- Subject:- financearrow_forwardUsing the binomial call option model to find the current value of a call option with a $25 exercise price on a stock currently priced at $26. Assume the option expires at the end of two periods, the riskless interest rate is ½ percent per period. What are the hedge ratios?arrow_forwardSuppose a put option is traded at $3. The underlying stock of the option is traded at $105 per share at the same time. The option expires in 3 months and has a strike price of $104. What is the intrinsic value of the option? Is the option in the money, at the money, or out of the money?arrow_forward
- A put option written on the stock of Taylor Enterprises (TE) hasan exercise price of $25 and 6 months remaining until expiration.The risk-free rate is 6%. A call option written on TE has the sameexercise price and expiration date as the put option. TE’s stock priceis $35. If the call option has a price of $12.05, then what is the price(i.e., value) of the put option? ($1.31)arrow_forwardThe current price of a stock is $33, and the annual risk-free rate is 4%. A call option with a strike price of $32 and with 1 year until expiration has a current value of $6.52. 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.arrow_forwardConsider shorting a call option c on a stock S where S = 24 is the value of the stock, K = 30 is the strike price, T = ½ is the expiration date, r = 0.04 is the continuously compounded interest rate per year, and = 0.3 is the volatility of the price of the stock. Determine the delta ratio Δ .arrow_forward
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- Suppose a stock is currently (time t = 0) worth 100. Further, suppose the one year annually compounded interest rate is 2%, and the two year annually compounded rate is 3%. Find the following:a) The forward price for a forward contract on the stock with maturity year T1 = 1. b) The forward price for a forward contract on the stock with maturity year T2 = 2.c) The forward price for a forward contract with maturity T1 = 1 on a ZCB with maturity T2 = 2.d) The forward price for a forward contract with maturity T1 = 1 on a forward contract on the stock with maturity T2 = 2 and delivery price K = 101.arrow_forwardWhat is the value of a call option if the underlying stock price is $82, the strike price is $90, the underlying stock volatility is 51 percent, and the risk-free rate is 3 percent? Assume the option has 62 days to expiration. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of a call optionarrow_forwardWhat is the value of a put option if the underlying stock price is $44, the strike price is $37, the underlying stock volatility is 49 percent, and the risk-free rate is 5.6 percent? Assume the option has 137 days to expiration. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of a put optionarrow_forward
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