Suppose a Situation Exists Where You Can Purchase a Share

question 21

Essay

Suppose a situation exists where you can purchase a share of stock for $25, purchase a put option on the stock for $3, and write a call option against the stock for $4. Also suppose that holding these three positions guarantees a payoff of $30 one year from today. If the risk free rate is 20%, does put-call parity hold? If not, then what new price of the put option would allow put-call parity to hold?

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Definitions:

Complex Marriage

A form of marriage involving multiple partners, where all members are considered married to each other, rejecting traditional monogamy.

Spiritual Equality

The belief that all individuals possess the same spiritual value and rights regardless of their background, religion, or social status.

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Ideal communities that offered innovative social and economic relationships to those who were interested in achieving salvation.

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