6. Let C be the price of a European call option that enables its holder to...
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6. Let C be the price of a European call option that enables its holder to buy one share of a stock at a strike price K at time T; also, let P be the price of a European put option that enables its holder to sell one share of the stock for the amount K at time T. Let S be the price of the stock at time 0. Assuming that r is the effective interest per time period. Show that if K S+PC > (1+r)T' then there is an arbitrage opportunity. 6. Let C be the price of a European call option that enables its holder to buy one share of a stock at a strike price K at time T; also, let P be the price of a European put option that enables its holder to sell one share of the stock for the amount K at time T. Let S be the price of the stock at time 0. Assuming that r is the effective interest per time period. Show that if K S+PC > (1+r)T' then there is an arbitrage opportunity.
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