Question: You are considering purchasing a put option on a stock with a current price of $44. The exercise price is $47, and the price of

You are considering purchasing a put option on a stock with a current price of $44. The exercise price is $47, and the price of the corresponding call option is $3.55. According to the put-call parity theorem, if the risk-free rate of interest is 5% and there are 90 days until expiration, the value of the put should be ____________.

$3.55

$5.99

$6.11

$7.58

These are the possible answers, please show work.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

You purchase one put contract with exercise rice of $140 for a put premium of $9. If the contract is for 100 shares of stock, the maximum profit that you could gain from this strategy is $14,000 $140...

Question 10: Put-call parity: You are considering purchasing a put option on a stock with a current price of $22. The price of the corresponding call option is $2.45 and the exercise price of both...

D. decrease; decrease 31. You find the option prices for three June call options on the same stock. The 95 call has an implied volatility of 25%, the 100 call has an implied volatility of 25%, and...

14. A hedge ratio of 0.70 implies that a hedged portfolio should consist of A. long -70 calls for each short stock B. long -70 shares for each long call C. long -70 shares for each short call D....

You are considering purchasing a put option on a stock with a current price of $44. The exercise price is $47, and the price of the corresponding call option is $3.55. According to the put- call...

You are considering purchasing a put option on a stock with a current price of $ 2 2 . The exercise price is $ 2 4 , and the price of the corresponding call option is $ 2 . 4 5 . According to the put...

You are considering purchasing a put option on a stock with a current price of $40. The exercise price is $44, and the price of the corresponding call option is $3.35. According to the put-call...

You are considering purchasing a put option on a stock with a current price of $42. The exercise price is $44, and the price of the corresponding call option is $3.45. According to the put-call...

QUESTION 3 Assume that a stock price is currently at S - $60. It is known that in one year stock price will be either $75 or $45. The annual interest rate is rp=5%. Using a one-period binomial tree...

Question 10: Put-call parity: You are considering purchasing a put option on a stock with a current price of $22. The price of the corresponding call option is $2.45 and the exercise price of both...

Consider the following sequences of offers and acceptances and determine whether there would be a contract in each case. a. September 1, 2014: A mails an offer to B. September 2, 2014: B receives the...

At the surface of a freshwater lake the pressure is 105 kPa. (a) What is the pressure increase in going 35.0 m below the surface? (b) What is the approximate pressure decrease in going 35 m above the...

When patient properties transferred too closely held corporation the taxable game is triggered

Generally speaking, _ _ _ _ _ _ _ _ blank organizations are decentralized. Group of answer choices staff flat diverse line vertical

What have been the primary effects of the Immigration Reform and Control Act on businesses?

Well before the passage of the Americans with Disabilities Act, in some instances employers were required to provide reasonable accommodation of the limitations of an employee or applicant. When did...

What is a bona fide occupational qualification? Provide at least two specific examples.