European call-european put prices satisfy put-call parity

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1) A stock price is currently $100. Over each of the next two six month periods it is expected to go up by 10% or down by 10%. The risk free interest rate is 8% per annum with contunous compounding. What is the value of a one year European call option with a strike price of $100.

2) For the situation above what is the value of a one year European put option with a strike price of $100. Verify that the European call and European put prices satisfy put-call parity.

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Reference no: EM131909684

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