Suppose that for P-Stock, a hypothetical company, current stock price is $42, the strike price is $40, the risk-free interest rate is 8% per annum, the price of a 6-month European call option is $2, and price of a three-month European put option is $2.2. Does put-call parity hold? What happens if put-call parity holds or does not hold?

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According to call parity Call Price Strike Price 1 rt Share Price ... View the full answer