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rosijanka
2 months ago
10

Intel Corp has a share price of $31.63 and a yearly dividend of $1.50 per year. An option with a strike price of $27 has a call

price of $6.10, and a put price of $2.65. It has a 1 yr expiry period. Assuming no interest, what is the predicted share price according to the put-call parity relationship
Business
1 answer:
soldi70 [3.6K]2 months ago
3 0

Answer:

According to put-call parity, the anticipated share price is $31.95.

Explanation:

Given values:

share price = $31.63

yearly dividend = $1.50 per year

strike price = $27

call price = $6.10

put price = $2.65

expiry duration = 1 year

Solution:

Put-Call Parity expresses the price relationship between a put option, a call option, and the underlying stock.

We will apply the fundamental put-call parity formula, which states:

Po + So = Co + (D + X × e^{-rt}...................1

In this equation, Po is the put option, Co is the call option, X is the strike price, So is the stock price, and D represents dividend, which is 0 in this case.

This means the stock price can be calculated as:

So + Po = Co + D + X

So + $2.65 = $6.10 + $1.5 + $27

So = $31.95

Thus, the predicted share price in accordance with the put-call parity is $31.95.

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