Answer: $1.50

## Explanation This question tests the understanding of put-call parity and how market prices may deviate from theoretical Black-Scholes prices. ### Put-Call Parity Formula Put-call parity states that for European options with the same strike price and expiration date: ``` C + PV(K) = P + S ``` Where: - C = Call price - P = Put price - PV(K) = Present value of strike price - S = Current stock price ### Applying the Information Given: - Market call price = $3.00 - Black-Scholes call price = $3.50 - Black-Scholes put price = $2.00 From put-call parity using Black-Scholes prices: ``` $3.50 + PV(K) = $2.00 + S ``` From put-call parity using market prices: ``` $3.00 + PV(K) = Market Put Price + S ``` ### Solving for Market Put Price Subtract the first equation from the second: ``` ($3.00 + PV(K)) - ($3.50 + PV(K)) = (Market Put Price + S) - ($2.00 + S) $3.00 - $3.50 = Market Put Price - $2.00 -$0.50 = Market Put Price - $2.00 Market Put Price = $2.00 - $0.50 = $1.50 ``` ### Verification The difference between the market call price and Black-Scholes call price is -$0.50. Due to put-call parity, the market put price should also be $0.50 less than the Black-Scholes put price: ``` $2.00 - $0.50 = $1.50 ``` Therefore, the correct market price for the put option is **$1.50**.

Author: LeetQuiz .