Answer-first summary for fast verification
Answer: $1.00
Using put-call parity for a non-dividend-paying stock: \[ c + Ke^{-rT} = p + S_0 \] So, \[ c = p + S_0 - Ke^{-rT} \] Substitute the values: \[ c = 1.85 + 14.00 - 15e^{-0.04\times 0.25} \] \[ c = 15.85 - 14.8507 \approx 0.9993 \] Therefore, the call price is approximately **$1.00**.
Author: Manit Arora
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Question-181.2. Put-call parity
The price of a non-dividend-paying stock is $14.00 and the price of a three (3)-month European put option on the stock with a strike price of $15.00 is $1.85. The risk free rate is 4.0% per annum. What is the price of a three (3)-month European call option with a strike price of $15.00?
A
$0.65
B
$1.00
C
$1.15
D
$1.88
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