Suppose the effective annual interest rate is 8%, Seay Companys stock currently trades for $63 per share, and the 1-year

Question:

Suppose the effective annual interest rate is 8%, Seay Company’s stock currently trades for $63 per share, and the 1-year forward price for Seay is $68.04. Suppose the premium for a 1-year call option on the stock is $11.8978, and the premium for a put with the same strike price is $9.0830. What is the strike price? (You may assume the stock pays no dividends over the next year.)

Expert Answer:

Answer rating: 100% (QA)

SOLUTION We can use the put call parity formula to solve for the strike

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