Question: Consider a stock that does not pay dividend. A one-year European put option with strike $40 is trading at $2.40 and a one-year European put

Consider a stock that does not pay dividend. A one-year European put option with strike $40 is trading at $2.40 and a one-year European put option with strike $50 is trading at $12.30. The risk-free interest rate is 5% per annum with continuous compounding. Construct an arbitrage strategy.

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