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1. A six-month European put on a stock with strike price $40 is currently trading for $4.50. The current price of the underlying stock is

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1. A six-month European put on a stock with strike price $40 is currently trading for $4.50. The current price of the underlying stock is $38, and the six-month risk-free interest rate is 6% per annum with continuous compounding. What is the price of a six-month European call with strike price $40? What are the transactions in the put, the stock, and borrowing or investing at the risk-free that create the call synthetically? Show the cash flows from each transaction today and in six months. Show that the net cash flows are the same of those of a six-month call with strike price $40. 1. A six-month European put on a stock with strike price $40 is currently trading for $4.50. The current price of the underlying stock is $38, and the six-month risk-free interest rate is 6% per annum with continuous compounding. What is the price of a six-month European call with strike price $40? What are the transactions in the put, the stock, and borrowing or investing at the risk-free that create the call synthetically? Show the cash flows from each transaction today and in six months. Show that the net cash flows are the same of those of a six-month call with strike price $40

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