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 $70 and both are worth $20.

If the interest rate is 5.25% a year, what is the stock price? (Hint: Use put–call parity.) (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Stock price $

Expert Solution

As per put call parity

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

20+70*e^(-0.0525*0.25)=Spot price+20

Spot price = 69.09

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