The price of a European call option on a non-dividend-paying stock with a strike price of $50 is $6 . The stock price is $51, the continuously compounded risk-free rate (all maturities) is 6% and the time to maturity is one year
What is the price of a one-year European put option on the stock with a strike price of $50?
A. $9.91
B. $7.00
C. $6.00
D. $2.09
D
Put-call parity is c+Ke-rT=p+S0 . In this case K=50, S0=51, r=0.06, T=1, and c=6 . It follows that
p=6+50e-0.06×1?51 = 2.09 .
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