The current price of a stock is $33, and the annual risk-free rate is 6 percent. A call option with an exercise price of $32 and 1 year until expiration has a current value of $6.56.
2007-02-18 03:40:00 · 2 answers · asked by the_gold3n_child 1 in Business & Finance ➔ Investing
Assuming the stock does not pay dividends, and the option is American style instead of European style, the put would be worth $3.88.
2007-02-18 04:52:48 · answer #1 · answered by zman492 7 · 0⤊ 0⤋
Check out the Put-Call parity relationship principal. I'm sure this is a homework question not a real-world applications so you would be better suited to know the parity relationship for future reference and academic testing.
If it's not a homework exercise, you should still understand it if you have any inclination to dabble in option investing.
2007-02-18 06:08:49 · answer #2 · answered by Showbizzz 2 · 0⤊ 0⤋