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Intel Corp has a share price of $31.63 and a yearly dividend of $1.50 per year. An option with a strike price of $27 has a call price of $6.10, and a put price of $2.65. It has a 1 yr expiry period. Assuming no interest, what is the predicted share price according to the put-call parity relationship

Respuesta :

Answer:

predicted share price acc to put call parity is $31.95

Explanation:

given data

share price = $31.63

yearly dividend = $1.50 per year

strike price = $27

call price = $6.10

put price = $2.65

expiry period = 1 year

solution

Put Call Parity is price relationship between put option, call option and underlying stock

so we apply here basic put call parity formula that is

Po + So = Co +( D + X × [tex]e^{-rt}[/tex]   ...................1

here Po is put option and Co is call option and X is strike price and So stock price and t is time and r is risk free rate and D is dividend and it is 0 here

so Stock price will be

So + Po = Co + D + X

So + $2.65 = $6.10 + $1.5 + $27

So = $31.95

so here predicted share price acc to put call parity is $31.95

abiolataiwo2015

Assuming no interest, The predicted share price according to the put-call parity relationship is $31.95.

Predicted share price

Using this formula

Predicted share price=Strike price+Call price+Dividend-Put price

Where:

Strike price=$27

Call price=$6.10

Dividend=$1.50

Put price=$2.65

Let plug in the formula

Predicted share price=$27+$6.10+$1.50-0$2.65

Predicted share price= $31.95

Inconclusion the predicted share price according to the put-call parity relationship is $31.95.

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