You are given:

1. The current price to buy one share of XYZ stock is 500.
2. The stock does not pay dividends.
3. The continuously compounded risk-free interest rate is 6%.
4. A European call option on one share of XYZ stock with a strike price of K that expires in one year costs 66.59.
5. A European put option on one share of XYZ stock with a strike price of K that expires in one year costs 18.64.

Using put-call parity, calculate the strike price, K.

• 449
• 452
• 480
• 559
• 582

Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

Key: C

66.59 – 18.64 = 500 – Kexp(–0.06) and so K = (500 – 66.59 + 18.64)/exp(–0.06) = 480.