Question

The price of a non-dividend-paying stock is $$\$ 19$$ and the price of a 3-month European call option on the stock with a strike price of $$\$ 20$$ is $$\$ 1$$. The risk-free rate is $4 \%$ per annum. What is the price of a 3-month European put option with a strike price of $$\$ 20$$ ?

   The price of a non-dividend-paying stock is $$\$ 19$$ and the price of a 3-month European call option on the stock with a strike price of $$\$ 20$$ is $$\$ 1$$. The risk-free rate is $4 \%$ per annum. What is the price of a 3-month European put option with a strike price of $$\$ 20$$ ?
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Options, Futures, and Other Derivatives
Options, Futures, and Other Derivatives
John C. Hull 10th Edition
Chapter 11, Problem 7 ↓

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Step 1

The risk-free rate is given as 4% per annum. To calculate the rate for a 3-month period, we need to divide it by 4 (since there are 4 quarters in a year). So the risk-free rate for the 3-month period is 4% / 4 = 1%.  Show more…

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The price of a non-dividend-paying stock is $$\$ 19$$ and the price of a 3-month European call option on the stock with a strike price of $$\$ 20$$ is $$\$ 1$$. The risk-free rate is $4 \%$ per annum. What is the price of a 3-month European put option with a strike price of $$\$ 20$$ ?
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