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What is the most your friend should pay for the put option

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Question - The interest effective annual interest rate is 10% for lending, and 20% for borrowing. Gamestop stock, $GME, has reached $400 per share (with negligible bid-ask spread). Your friend wants to buy a one-year European put option, with $500 strike price. Currently, one-year at-the-money European call options have a $49.00 - $50.00 bid-ask spread. There are no other taxes nor transactions costs. What is the most your friend should pay for the put option? Explain.

Reference no: EM132847652

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