Answer to Question #55874 in Finance for Lama

Question

Q2:
a- i) what would be the market price of six month call option on Ajax's stock , given that the stock currently trade at 70$ and is expected to be either 45$ or 100$ at the end of six months, if the strike price is 80 $. The annual risk free rate of interest is 10%.
ii) what is the value of the six month put option on the stock given the same underlying information for the call option .
b- verify that put/call parity holds for properly priced call and out options