Assume that the value of a call option with a strike price of $100 and six months remaining to maturity is $5. For a stock price of $100 and an interest rate of 6%, what is the value of the of the corresponding put option with the same strike price and expiration as the call option ?
A. $1.78
B. $2.87
C. $2.13
D. $5.00
Answer:C
The formula for put-call parity is : Call – Put = Stock – X/(1+r)t
Solving for the put results in: Call- Stock+X/(1+r)t=Put
P=C-S+X/(1+r)t = $5-$100+$100/1.06^0.5=$2.13