SOA Exam FAM Sample Question 78
Study guide: Exam FAM
The current price of a non-dividend paying stock is 40 and the continuously compounded risk-free interest rate is 8%. You are given that the price of a 35-strike call option is 3.35 higher than the price of a 40-strike call option, where both options expire in 3 months.
Calculate the amount by which the price of an otherwise equivalent 40-strike put option exceeds the price of an otherwise equivalent 35-strike put option.
- A) 1.55
- B) 1.65
- C) 1.75
- D) 3.25
- E) 3.35
Answer this question and see the worked solution