A 4-month European call option on a stock (with dividend) is currently selling for RM5. The price

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A 4-month European call option on a stock (with dividend) is currently selling for RM5. The price of the stock is RM64 and the strike price is RM60. The risk-free interest rate is 12% p.a. A dividend of RM0.80 is expected one month from now.

1. Is there any arbitrage opportunities? Show your work.

2. How much is the profit/loss if at maturity the price of the stock is higher than the strike price?

3. How much is the profit/loss if at maturity the price of the stock is lower than the strike price?

Related Book For answer-question

Fundamentals of Futures and Options Markets

ISBN: 978-0132993340

8th edition

Authors: John C. Hull

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Posted Date: May 11, 2022 07:04 AM

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A 4-month European call option on a stock (with dividend) is currently selling for RM5. The price

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Ans Abitauge oppotunity An crbitaage opportunity is Opportumity to punchuse the then asset secuarity ... View the full answer

Fundamentals of Futures and Options Markets

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