It is possible to buy three-month call options and three-month puts on stock Q

Finance Dec 24, 2020

It is possible to buy three-month call options and three-month puts on stock Q. Both options have an exercise price of $77 and both are worth $27.

If the interest rate is 7.15% a year, what is the stock price? (Hint: Use put–call parity.) (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Expert Solution

As per put call parity

Call price + PV of exercise price = Spot price + Put price

27+77*e^(-0.0715*0.25)=Spot price+27

Spot price = 75.68

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