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A stock has a spot price of $55. Its May options are about to expire. One of its puts is worth $5 and one of its calls is worth $10. The exercise price of the put must be __________ and the exercise price of the call must be ____________.

The answer is $60 and $50 respectively. Anyone knows the answers why?
 

David Harper CFA FRM

David Harper CFA FRM
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#2
i always could be missing something since i only spent 20 seconds reading the question, but it looks like a lame question: the answer suggests that put's value = its intrinsic value of $5 = 60 - 5, so has no time value. But the call has $5 of time value, so maturities don't match and put-call parity can't be applied, which is what you want to use. You want to be able to use c - p = S - K*exp(-rT), but you can't, so i don't get the question. Appears to me to lack the providing of at least one key assumption
 
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