Problem: Which one of the following statements is correct?
a. Value of put + present value of exercise = value of call + share price.
b. Value of put + share price = value of call + present value of exercise price.
c. Value of put - share price = present value of exercise price - value of call.
d. Value of put + value of call = share price - present value of exercise price.
The correct statement equates the value of two investment strategies. Plot the payoffs to each strategy as a function of the stock price. Show that the two strategies give identical payoffs.