ABC stock is priced at $74.20 per share. The company just paid its $1.10 quarterly dividend....

Question

Question

ABC stock is priced at $74.20 per share. The company just paid its $1.10 quarterly dividend.

Annual interest rates are 6.0%. A $70.00 strike European call, maturing in 6 months, sells for

$6.50. Calculate the price of a $70.00 strike European put, maturing in 6 months.

Answer 1

Answer #1

we know that put call parity euqation is

'' value of call(Vc)+ present value of strike (X) = value of put (Vp) + value of stock (Vs)''

When there is a dividend, then

''Vc + X = Vp + Vs - P.V (DIVIDEND)''

Value of Put (Vp) = Vc + X - Vs + P.V(dividend)

Answer 2

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