Question: What is the payoff from Strategy B? Work Sheet #6 Put-Call parity Consider the case of European IBM call and put options that have exercise

What is the payoff from Strategy B?

Work Sheet #6 Put-Call parity Consider the case of European IBM call and put options that have exercise price of $115 and expire in two months. The price of the call is $2, and the price of the put is $6. Assume IBM is expected to pay no dividend in the next two months. Suppose also that the current price of IBM stock is $109.30 and the bond-equivalent yield on a two-month T-bill is 9 percent annualized or 1.5 percent nonannualized. Confirm Put-Call parity from the following two strategies: Equation 1. Present Value of Exercise Price - Stock price + Put premium - Call premium Strategy A: Buy IBM stock, buy a put, and sell a call. Strategy B: Buy a T-bill with face value of $115

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