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Option Puts for File Co: put-call parity

The common stock of File Co. is selling at $90. A 26-week call option written on file's stock is selling for $8. The call's exercise price is $100. The risk-free rate is 10% per year.

1. Suppose that puts on File Co stock are not traded, but you want to buy one. How would you do it?

2. Suppose that puts are traded. What should a 26-week put with an exercise price of $100 sell for?

Solution Preview

Please find my response below.

1). We will use the Put-Call Parity to determine the price of the put. According ...

Solution Summary

The solution answers the questions below.

$2.19