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Law Incorporation [45]
3 years ago
13

The exercise price of the options is $100 per share, all options are European, and the stock does not pay any dividend. The call

price is $25 per share and the put price is $17 per share. Both options mature in 2 years. Finally, the annual rate of interest is 5% with continuous compounding. What is the stock price today?
Business
1 answer:
defon3 years ago
3 0

Answer:

Stock Price is $98.70

Explanation:

given data

exercise price = $100 per share

call price = $25 per share

put price = $17 per share

mature time = 2 years

annual rate of interest = 5%

to find out

What is the stock price today

solution

we will use here Put Call Parity for find out Stock Price that is express as

C + \frac{100}{(1+r)^t} = S + P    .....................a

we know here that C is call price and r is rate and t is time and S is Stock Price and P is put price

so put all value in equation a

C + \frac{100}{(1+r)^t} = S + P

25 + \frac{100}{(1+0.5)^2} = S + 17

solve it we get

P = $98.70

so Stock Price is $98.70

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