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Exercise 8.9 a)State the Put-Call Parity. b)Suppose the interest rate is r=.05 per year compounded continuously and the current value of an asset, S, is

Exercise 8.9

a)State the Put-Call Parity.

b)Suppose the interest rate is r=.05 per year compounded continuously and the current value of an asset, S, is $100.

c)Suppose P_100 costs $5 with expiration date 1 year from now. How much is C_100?

d)Suppose C_100 costs $6 with expiration date 1 year from now. How much is P_100?

e)What is the lower bound for C_100?

f)Compute C_105P_105, 15 months from now.

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