HighFlyer Stock currently sells for $48. A one-year call option with strike price of $55 sells for $9, and the risk-free interest rate is 6%. What is the price of a one-year put with strike price of $55?
A) $9.00
B) $12.89
C) $16.00
D) $18.72
E) $15.60

Question

Quizplus · Accepted Answer

Using the put-call parity formula: P = C + X/(1+r)^t - S, where P is the put price, C is the call price ($9), X is the strike price ($55), r is the risk-free rate (6%), t is the time (1 year), and S is the stock price ($48). Plugging in the values, P = 9 + 55/(1+0.06)^1 - 48 = $12.89.

HighFlyer Stock Currently Sells for $48