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Fundamental principle-take two portfolios

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Let c and p be the price today (at time t = 0) of a European call and put, respectively, with strike K and expiration date T. Let S0 be the spot price of the underlying asset, which pays a dividend. Let D be the present value of the dividend. Show that p + S0 = c + D + Ke^(−rT) using the fundamental principal.

Fundamental Principle: Take two portfolios, A and B. If the value of portfolio A can be guaranteed to be greater than or equal to the value of portfolio B at time T, then the value of portfolio A is greater than or equal to the value of portfolio B at anytime before time T, including right now.

Reference no: EM131848219

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