General Eclectics, Inc., has both European call and put options traded on the Chicago Board Options Exchange. Both options have the same exercise price of $40 and both expire in one year. General Eclectic’s stock does not pay dividends. The call and the put are currently selling for $8 and $2, respectively. The risk-free interest rate is 10% per annum. What should the stock price of General Eclectics, Inc., be in order to prevent arbitrage?

Answer rating: 100% (QA)

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