One-year European call and put options on an asset are worth $3 and $4 respectively when the strike price is $20 and the one-year risk-free rate is 5%.What is the one-year futures price of the asset if there are no arbitrage opportunities? (Use put-call parity.)
A) $19.55
B) $18.95
C) $20.95
D) $20.45

Question

Quizplus · Accepted Answer

Put call parity is c+ Ke^-rT =p+ F₀e^-rT Hence F₀=K+(c-p)e^rT =20+(3-4)e^0.05×1= $18.95

One-Year European Call and Put Options on an Asset Are