The current price of a non-dividend paying stock is $11. The price of six-month European call...
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The current price of a non-dividend paying stock is $11. The price of six-month European call and put options on the stock are $1.60 and $0.10, respectively. The call and put options have the same strike price of $10. The interest rate is 5% per annum with continuous compounding. A trader concludes that the put option is Today, the trader can exploit this mispricing by: the put option the stock the call option = $ today. relative to the call option. This will result in zero cash flow today and achieve an arbitrage profit of $ (4 decimal places; do not put in the dollar sign in any answers) at the maturity date of these options. The current price of a non-dividend paying stock is $11. The price of six-month European call and put options on the stock are $1.60 and $0.10, respectively. The call and put options have the same strike price of $10. The interest rate is 5% per annum with continuous compounding. A trader concludes that the put option is Today, the trader can exploit this mispricing by: the put option the stock the call option = $ today. relative to the call option. This will result in zero cash flow today and achieve an arbitrage profit of $ (4 decimal places; do not put in the dollar sign in any answers) at the maturity date of these options.
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