Question
suppose that the stock price $32, the risk-free interest rate is 10% per year the price...
suppose that the stock price $32, the risk-free interest rate is
10% per year the price of a 4 month european call option is $2.75,
and the price of a 4 month european put option is $2.25. both
options have the strike price $39. describe an arbitrage strategy
and justify it with appropriate calculations.
second part
use th same data above ut suppose now that the call price is
$3.75 and the put price is $2. is there still an arbitrage
oppurtunity? describe an appropriate strategy and justify it with
appropriate calculations please.
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Answer #1
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