Explanation:
Using put-call parity: p = c + X / (1 + r)^T - S_0 = 4.10 + (27.50 / 1.06) - 25 = \`5.04`$.
(Book 3, Module 39.2, LO 39.c)
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Consider a 1-year European call option with a strike price of $27.50 that is currently valued at $4.10 on a $25 stock. The 1-year risk-free rate is 6% compounded annually. Which of the following is closest to the value of the corresponding put option?
A
$0.00.
B
$4.95.
C
$5.00.
D
$5.04.
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