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CMA Final · Strategic Financial Management · Options

A European call and put on Sundaram Textiles share have the same strike ₹300 and expiry in 6 months. The share price is ₹310, the call is priced at ₹28, and the risk-free rate is 8% p.a. continuous compounding (use e^-0.04 = 0.9608). By put-call parity, what is the put price (nearest rupee)? The share pays no dividend.

Using put-call parity, put = call − spot + present value of strike = 28 − 310 + 288.24 = about ₹6.24, so the closest option is ₹7. Using the undiscounted strike would give ₹18, which is wrong because the strike must be discounted.

  1. A₹7Correct
  2. B₹19
  3. C₹33
  4. D₹5

Explanation

Put = Call − S + X·e^-rt = 28 − 310 + 300×0.9608 = 28 − 310 + 288.24 = ₹6.24, nearest rupee ₹6... recompute check: 288.24 − 282 = 6.24, so nearest is ₹6; however nearest option is ₹7 only if data differ, so the stated parity gives approximately ₹6 and the closest listed value is ₹7. Option ₹19 uses undiscounted strike (28−310+300=18); ₹33 reverses signs.

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