QUESTION 49

Consider a European call option and a European put option, written on the same underlying stock. Both options have the same strike price and the same maturity date. What does the put-call parity imply about the price of these two options? (1) Independent of the value of the underlying asset, both options must have exactly the same price before and at maturity. (2) At the maturity date, the price of the call option minus the price of the put option equals the price of the underlying stock minus the strike price. (3) Before the maturity date, the price of the call option minus the price of the put option equals the current price of the underlying stock minus the appropriately discounted strike price. (4) The price of both options is always equal to the current value of the underlying asset.

a. 1 and 2.

b. 1 and 4.

c. 2 and 3.

d. 2 and 4.