Suppose that r = 0.06 and that for a certain stock that pays continuous dividends, = 0.02 and the current stock price is S0 = 50. Suppose that for this same stock, a European put option with strike price K = 50 and expiration at time T = 1/4 (3 months), the put option price is P(K) = 3.85.

(a) Write down the theoretical equation that expresses the put-call parity before you perform calculations. (No numerical values from the above in this equation.)

(b) On the basis of the put-call parity, what is the numerical value of the European call option price C(K) for the same strike price and expiration as for the put ? Use two decimal places in your answer. Show your work