You happen to be checking the newspaper and notice an arbitrage opportunity. The current stock price of

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You happen to be checking the newspaper and notice an arbitrage opportunity. The current stock price of Intrawest is $22 per share and the one-year risk-free interest rate is 7%. A one-year put on Intrawest with a strike price of $20 sells for $3.08, while the identical call sells for $6.97. Explain what you must do to exploit this arbitrage opportunity.

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Fundamentals Of Corporate Finance

ISBN: 9781292437156

5th Global Edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

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