The stock price 6 months from the expiration of an option is $42, the exercise price of the option is $40, the risk-free rate is 10% per annum, and the volatility is 20% per annum. a) What is the price on a European call? b) What is the price of a European put? c) Check the put-call parity is satisfied.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter20: Financing With Derivatives
Section20.A: The Black-scholes Option Pricing Model
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The stock price 6 months from the expiration of an option is $42, the exercise
price of the option is $40, the risk-free rate is 10% per annum, and the volatility is
20% per annum.
a) What is the price on a European call?
b) What is the price of a European put?
c) Check the put-call parity is satisfied.
Transcribed Image Text:The stock price 6 months from the expiration of an option is $42, the exercise price of the option is $40, the risk-free rate is 10% per annum, and the volatility is 20% per annum. a) What is the price on a European call? b) What is the price of a European put? c) Check the put-call parity is satisfied.
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