2. Given the following data, is there an Arbitrage? What is the Profit when St > K and St < K for the following two scenarios? a) When the price of the put is 2.5 b) When the price of the put is $0.5 C = 3 SO = 31 T= 4months r = 9% K = 30 D= 0

2. Given the following data, is there an Arbitrage? What is the Profit when St > K and St < K for the following two scenarios? a) When the price of the put is 2.5 b) When the price of the put is $0.5 C = 3 SO = 31 T= 4months r = 9% K = 30 D= 0

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

2. Given the following data, is there an Arbitrage? What is the
Profit when St > K and St < K for the following two
scenarios?
a) When the price of the put is 2.5
b) When the price of the put is $0.5
SO = 31
r = 9%
C = 3
T= 4months
K = 30
D= 0

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