Assume a stock has a value of $100 The stock is expected to pay a dividend of $2 per share at year end An at the money European style put option with one year maturity sells for $7 If the annual interest rate is 5 , what must be the price of a 1 year at the money European call option on the stock ...

Putcall parity states that P C ...

Assume a stock has a value of $100. The stock is expected to pay a dividend of

Question:

Assume a stock has a value of $100. The stock is expected to pay a of $2 per share at year-end. An at-the-money European-style put option with one-year sells for $7. If the annual interest rate is 5%, what must be the price of a 1-year at-the-money European call option on the stock?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...