Error on book w/ image

CFA Level I
#1

Hello guys I think there is an error on my schweser book. page 186 of book 5. Do you have the same error?

I bought this set on ebay…

#2

Unfortunately the professor’s note does not specify the case when the risk-free rate decreases, only when it increases. But if it didn’t specify that case, then it should be intuitive: for call options the relation between RFR and call value is positive, but for put options the relation is negative.

#3

You can always recall put call parity equation when in doubt.

#4

wait, I was asking if that is an error on the book…

#5

If

C + [X / (1 + Rf)^T] = S + P

Then what is the relationship between Rf and the value of the put and call options (holding other inputs constant)?

#6

C - S + [X / (1 + Rf)^T] = P. Keeping other things equal, you can clearly see put option and risk free rate are inversely related. P + S - [X / (1 + Rf)^T] = C. Keeping other things constant, they are directly related.

#7

lol… I like the attitude. thank ya

#8

You are welcome.