Assume that the value of a put option with a strike price of $100 and six months remaining to maturity is $5. For a stock price of $110 and an interest rate of 6%, what value is closest to the corresponding call option with the same strike price and same expiration as the put option?
What I did was compute the present value of the exercise price which came to 97.12 and then subtracted it from 110 to get C option as the answer
But the correct answer is
Call value = $110 + $5 – $100 / 1.060.5 = $17.87.
Can anyone please explain why $5 was added too?What does the value of the put option with the value of the call option?