A put option that expires in eight months with an exercise price of $57 sells for $3.85.The stock is currently priced at $59,and the risk-free rate is 3.1 percent per year,compounded continuously.What is the price of a call option with the same exercise price and expiration date?
A)$6.67
B)$7.02
C)$7.34
D)$7.71
E)$7.80

Question

Quizplus · Accepted Answer

$59 + $3.85 = $57 e^{-(0.031)(2/3)} + C; C = $7.02

A Put Option That Expires in Eight Months with an Exercise