European call option on hal stock

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Reference no: EM131934393

You are an option dealer. One of your clients wants to purchase a one-year European call option on HAL stock with a strike price of $20. Another dealer is willing to sell you a one-year put option on HAL stock with a strike price of $20 for $3.50 per share. If HAL pays no dividends and is currently trading for $18 per share, and if the risk-free rate is 4%, what is this lowest price that you can charge for the call if you want to make $0.10 profit.

Reference no: EM131934393

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