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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? | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

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.

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