(Ⓒ) Suppose that the • Stock price of a stock is $59. Risk - free interest rate is 10% per annum • Exercise price of above stock is $50. Price of a 3-month European call option is $3 • Price of a 3-month European put option is $2.25 An arbitrage opportunity exists? If yes, calculate arbitrage profit if closing price of underlying is $90 on the day of expiry of option.
(Ⓒ) Suppose that the • Stock price of a stock is $59. Risk - free interest rate is 10% per annum • Exercise price of above stock is $50. Price of a 3-month European call option is $3 • Price of a 3-month European put option is $2.25 An arbitrage opportunity exists? If yes, calculate arbitrage profit if closing price of underlying is $90 on the day of expiry of option.
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
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Transcribed Image Text:(1) Suppose that the Stock price of a stock is $59. Risk - free interest rate is 10%
per annum • Exercise price of above stock is $50 Price of a 3-month European
call option is $3• Price of a 3-month European put option is $2.25 An arbitrage
opportunity exists? If yes, calculate arbitrage profit if closing price of underlying is
$90 on the day of expiry of option.
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