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The one-year call on TLM stock with a strike price of $65 is priced at $2.20 while the one-year put with a strike price of $65 is priced at $11.18. The annual risk-free rate is 3.8 percent, compounded continuously. What is the current price of TLM stock?
A) $56.70
B) $53.60
C) $47.65
D) $50.10
E) $48.90

Respuesta :

Tundexi

Answer:

B) $53.60

Explanation:

According to the Put-Call Parity, Put Price + Stock Price = Call Price + [Strike Price*e^-(r*t)]

$11.18 + Stock Price = $2.20 + [$65 * e^-(0.038 * 1)]

Stock Price = $2.20 + [$65 * 0.9627] - $11.18

Stock Price = $2.20 + $62.58 - $11.18

Stock Price = $53.60

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