Question

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.

Answer #1

the price of a non-dividend-paying stock is $19 and the price of
a 3-month European call option on the stock with a strike price of
$20 is $1, while the 3-month European put with a strike price of
$20 is sold for $3. the risk-free rate is 4% (compounded
quarterly). Describe the arbitrage strategy and calculate the
profit.
Kindly dont forget the second part of the question

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Formulas would be greatly appreciated

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