Answer: $28.25

The correct answer is **A ($28.25)**. According to put-call parity for European options, the relationship is given by: $$S_0 + P_0 = C_0 + \frac{X}{(1 + r)^T}$$ Where: - $S_0$ is the spot price ($40), - $P_0$ is the put premium, - $C_0$ is the call premium ($10), - $X$ is the strike price ($60), - $r$ is the interest rate (3%), - $T$ is the time to expiry (1 year). Substituting the values: $$40 + P_0 = 10 + \frac{60}{1.03}$$ Solving for $P_0$: $$P_0 = 10 + \frac{60}{1.03} - 40 = 28.25242718 \approx 28.25$$ **Option B ($30.00)** is incorrect because it fails to discount the strike price by $(1 + r)^T$. **Option C ($108.25)** is incorrect because it incorrectly adds the spot price instead of subtracting it from the discounted strike price.

Author: LeetQuiz Editorial Team