Value of a Put

CFA Level II
#1

Nolte is considering the purchase of a put on a futures contract with an exercise price of $22. Both the option and the futures contract expires in 6 months. The call price is $1.00 and the futures price is $20.00. The value of the put option on the futures contract is: A) 2.95 B) 2.65 C) 2.45 D) 2.30

#2

A

#3

No Risk free rate? A is closest.

#4

i’d say a as well, but do we not need the risk free rate to answer this?

#5

You don’t need a rate for this? Damn. 3=~2.95. A

#6

LOL.

#7

think we definitely need the rf rate. it’s put call parity problem, we can’t price the discount bond w/o it, can we? i can guess at 2.95, but…

#8

rfr 0 : Put = 3 rfr 50% Put = 2.63 its got to be closest to A, right?!?

#9

a RFR of 6% gets close to B. if I had to guess without the RFR, I would guess A.

#10

sorry the continuously compounded risk free rate is 5%

#11

dude

#12

A with no Risk free rate… C with 5%

#13

slouiscar Wrote: ------------------------------------------------------- > dude LOL. I almost fell out of my chair!

#14

I still get A w/ a 5% rf rate. it’s a six month contract.

#15

so its C

#16

Continuosly compounded?

#17

edit: i’m a tool

#18

if it’s continuously compounded, don’t you just go 1.05^.5?

#19

put call parity w/ forwards: P = C + (X - F) / (1 + Rf)^T here with a cc rfr: P = C + (X - F) e ^(-Rf * T) P = 1 + (22 - 20) e ^(-.05 * .5) = 2.9506 If there was no rfr given you’d still have to go closest to A I mean you would need a 50% rfr to get close to B… P = 1 + (22 - 20) e ^(-.50 * .5) = 2.5576

#20

1+22/(e^.05/2)-20=2.456818