Microsoft May 2020 (1 year) 130 (strike price) calls are selling for 12.00 ( 1 contract is for 100 shares, so $1,200) at...
Microsoft May 2020 (1 year) 130 (strike price) calls are selling for 12.00 ( 1 contract is for 100 shares, so $1,200) at time when Microsoft has a market value of 134 per share and risk free rate is 3.0%. Microsoft pay no dividends. What would be the Market price of Microsoft May 2020 puts with a strike price of 130 ?
Homework Answers
According to the Put-call Parity
Put Price + Stock Price = Call Price + [Strike Price / (1 + r)n]
Put Price = Call Price + [Strike Price / (1 + r)n] - Stock Price
= $12 + [$130 / (1 + 0.03)] - $134
= $12 + $126.21 - $134
= $4.21
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