The price of a (non-dividend) stock is $21 and the price of a 3-month European call option on the stock with a strike price of $20 is $2. The risk-free rate is 4% per annum with continuous compounding. What is the price of a 3-month European put option with a strike price of $20?

The price of a (non-dividend) stock is $21 and the price of a 3-month European call option on the stock with a strike price of $20 is $2. The risk-free rate is 4% per annum with continuous compounding. What is the price of a 3-month European put option with a strike price of $20?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 4P: Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call...

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

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