The current price of a stock is $39.99. A one-year call option on the stock with a strike price of $38.83 has a current price of $6.02. The annual risk-free rate is 4%. Assume daily interest compounding. What is the current value of a one-year put option on the stock with the same exercise price?
According to put-call parity
Put Premium + Stock Price = Call Premium + [Strike Price / (1 + r)n]
Put Premium = Call Premium + [Strike Price / (1 + r)n] - Stock Price
= $6.02 + [$38.83 / {1 + (0.04/365)}365] - $39.99
= [$38.83 / 1.0408] - $33.97
= $37.31 - $33.97 = $3.34
The current price of a stock is $39.99. A one-year call option on the stock with...
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