00:01
Hello students, here is a question.
00:02
A europe call option and a put option on a stock both have a strike price of $40 and expiration date is 3 months.
00:10
The call sell for $4 and the put sell for $3 .5.
00:14
The risk -free rate is 10 % per annum and offer all the maturities.
00:19
And the current stock price is $41.
00:21
The next dividend is expected for 6 months value of $1 per share.
00:26
And the second sub -question is, check whether the put call parties hold and the third is, if put call parties do not hold, describe the step by step how the investors can take the advantages of attribute opportunity to make the profit.
00:39
And the fourth is, if these two options are american options rather than the europe option, briefly explain whether the put call parties should hold here or not.
00:50
So this is our question.
00:51
Let us discuss the answer for this.
00:53
So the put call party states the price of european call option minus the price of european put option.
01:00
So it is put call party states that the price of price of europe call, european call minus the price of european put option, price of european put option.
01:30
So that is the difference between the stock price and the present value of a strike.
01:37
Stock price minus present value of price.
01:42
So that is c minus p is equal to s minus ke to the power minus rt.
01:49
So where the c is the price of a call option, p is the price of a put option, s is the current stock price, k is the strike price, r is the risk -free rate, t is the time to expiration.
02:05
So let us plug the values for this now.
02:07
So the values will be 41 minus 40, e to the power minus 0 .1 into 0 .25.
02:21
So the answer we get 0 .5.
02:25
So which is not equal to, not equal to 2 .02...