One-year European call and put options on an asset are worth $3 and $4 respectively when the strike price is $20 and the one-year risk-free rate is 5%
What is the one-year futures price of the asset if there are no arbitrage opportunities? (Use put-call parity.)
A. $19.55
B. $18.95
C. $20.95
D. $20.45
B
Put call parity is
c+ Ke-rT =p+ F0e-rT
Hence
F0=K+(c-p)erT =20+(3-4)e0.05×1= $18.95
Business
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