Financial Risk Manager Part 1

Get started today

Ultimate access to all questions.

Explanation:

For a zero-cost package of a long call and a short put with the same strike, set the option prices equal: $C=P$ . By put-call parity for a non-dividend-paying stock,

C-P=S-Ke^{-rT}

So if $C=P$ , then

0=S-Ke^{-rT} \quad\Rightarrow\quad K=Se^{rT}

Substitute the values:

K=20\,e^{0.04}\approx 20.82

So the correct strike is $20.82.

Explanation:

For a zero-cost package of a long call and a short put with the same strike, set the option prices equal: $C=P$ . By put-call parity for a non-dividend-paying stock,

C-P=S-Ke^{-rT}

So if $C=P$ , then

0=S-Ke^{-rT} \quad\Rightarrow\quad K=Se^{rT}

Substitute the values:

K=20\,e^{0.04}\approx 20.82

So the correct strike is $20.82.

Comments (0)

No comments yet.

Q-10.1 Assume the current price of a non-dividend-paying stock is `$20` (S=20) with volatility of 30%. The riskfree rate is 4%. If option terms are one year (T=1), what is the same strike price required for two European options that creates a range forward contract; i.e., a package consisting of a long (short) call and a short (long) put with zero initial cost?

Exam-Like

Community

MManit

Last updated: April 18, 2026 at 11:32

$18.82

33.3%

$19.52

33.3%

$20.82

$22.52

33.3%