A put option and a call option with an exercise price of $55 and three months to expiration sell for $1.15 and $5.30, respectively. If the risk-free rate is 4.2 percent per year, compounded continuously, what is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current stock price
A put option and a call option with an exercise price of $55 and three months to expiration sell for $1.15 and $5.30, respectively. If the risk-free rate is 4.2 percent per year, compounded continuously, what is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current stock price
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![### Option Pricing Problem
In this exercise, you are given the following conditions for options pricing:
- A **put option** and a **call option** both have an exercise price of **$55** and three months until expiration.
- The put option sells for **$1.15**, while the call option sells for **$5.30**.
- The **risk-free rate** is **4.2% per year**, compounded continuously.
**Task:**
Calculate the current stock price.
**Instructions:**
- Do not round intermediate calculations.
- Round your final answer to **two decimal places** (e.g., 32.16).
**Input Field:**
- **Current stock price**: [Input Box]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff00761e5-6ea2-4b64-9c87-d0591240e351%2F6ec1b649-8d6c-41da-8b2e-6c290133e853%2Fhcjiv6k_processed.png&w=3840&q=75)
Transcribed Image Text:### Option Pricing Problem
In this exercise, you are given the following conditions for options pricing:
- A **put option** and a **call option** both have an exercise price of **$55** and three months until expiration.
- The put option sells for **$1.15**, while the call option sells for **$5.30**.
- The **risk-free rate** is **4.2% per year**, compounded continuously.
**Task:**
Calculate the current stock price.
**Instructions:**
- Do not round intermediate calculations.
- Round your final answer to **two decimal places** (e.g., 32.16).
**Input Field:**
- **Current stock price**: [Input Box]
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