A call option on Juniper Corp. stock with an exercise price of $75 and an expiration date 1 year from now is worth $3 today. A put option on Juniper Corp. stock with an exercise price of $75 and an expiration date 1 year from now is worth $2.50 today. The risk-free rate of return is 8%, and Juniper Corp. pays no dividends. The stock should be worth ________ today.
A) $69.73
B) $71.69
C) $73.12
D) $77.25

Question

Quizplus · Accepted Answer

S₀ = C + Xe−rT − P; S0 = 3.00 + (75)e^−(0.08)(1) − 2.5 = 69.73

A Call Option on Juniper Corp