Answer-first summary for fast verification
Answer: $5.80
Use **put-call parity for a dividend-paying stock**: \[ c + K e^{-rT} + D = p + S_0 \] Solve for the put price: \[ p = c + K e^{-rT} + D - S_0 \] Where the present value of dividends is: \[ D = 1e^{-0.04(1/12)} + 1e^{-0.04(4/12)} = 1.983472 \] Now compute: \[ p = 5 + 60e^{-0.04(0.5)} + 1.983472 - 60 \] \[ p \approx 5.7953 \] So the closest answer is **B. $5.80**.
Author: Manit Arora
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Question 182.4. The price of a European call that expires in six (6) months and has a strike price of $60.00 is $5.00. The underlying stock price is $60.00, and a dividend of $1.00 is expected in one (1) month and again in four (4) months. The term structure is flat, with all risk-free interest rates at 4.0%. What is the price of a European put option that expires in six (6) months and has a strike price of $60.00?
A
$3.81
B
$5.80
C
$5.96
D
$6.04
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