Answer:
$3.06
Explanation:
The put call parity shows the relationship between the price of European put options and European call options of the same strike price and expiry date.
Given that:
Strike price (K) = $50
Price (C) = $6
rate (r) = 6% = 0.06
Stock price (SO) = $51
Time (T) = 1 year
Dividend (D) = $1
The period of dividend (t) = 6 months = 0.5 years
The put call parity (P) is given by the equation:
[tex]P+SO=C+Ke^{-rT}\\P=C+Ke^{-rT}-SO[/tex]
The dividend present value = [tex]De^{-rt}=1e^{-0.06*0.5}=\$0.97[/tex]
[tex]P=C+Ke^{-rT}-SO\\P=6+50e^{-0.06*1}-(51-0.97)\\P=6+47.088-50.03\\P=\$3.06[/tex]
