Answer:
The answer is 5.559539 or 5.56.
Explanation:
From the given question let us recall the following statements
The current price of A put option on a stock = $47
With an exercise price of $49
Annual risk-free rate of annual interest is = 5%
The corresponding price call option is = $4.3
The next step is to find the put value
Now,
The Call price + Strike/(1+risk free interest) The Time to maturity =
Spot + Put price
Thus
The,Put price = Call price - Spot + Strike/(1+risk free interest)Time to maturity
When we Substitute the values, we get,
Put price = (4.35 - 47) + 49/1.05 4/12
Therefore, The Put Price = 5.559539 or 5.56
Answer:
The Put Value of the stock is 5.55
Explanation:
To compute the Put Price;
Therefore,
Put price = [tex]\frac{Exercise Price}{(1+ risk free interest)^{Maturity Time}} + Call Price - Current Price[/tex]
By substituting the value in the formula
Put Price = [tex]4.35 + [49 / (1 + 0.05)^{4/12}] - 47[/tex]
Put Price = [tex]4.35 + [49 / (1.05)^{4/12}] -47[/tex]
Put Price = [tex]4.35 + [49 / 1.02] -47[/tex]
Put Price = 4.35 + 48.21 – 47
Put Price = 5.55
