Consider a stock index currently standing at 250.The dividend yield, q , on the index is 4% per annum and the risk-free rate, r , is 6% per annum.A 3-month European Call option on the index with a strike price of 245 is currently worth $10.We want to value a 3-month European put option on the index with a strike price of 245.

a)The put-call parity relationship for European-style options on a non-dividend paying stock with price S₀ and strike K is , where r is the risk-free rate and c & p are the value of the call and the put, respectively.What is the put-call parity relationship for the dividend yielding index?Carefully define your notation.

1. What is the value of the put in this question?