Question: Options theory. Please help! Consider a stock that does not pay dividend. A one-year European put option with strike $60 is trading at $6 and

Options theory. Please help! Consider a stock that does not pay

Options theory. Please help!

Consider a stock that does not pay dividend. A one-year European put option with strike $60 is trading at $6 and a one-year European put option with strike $80 is trading at $25. The risk-free interest rate is 8% per annum with continuous compounding. Construct an arbitrage strategy. 7. Consider a stock that does not pay dividend. A one-year European put option with strike $60 is trading at $6 and a one-year European put option with strike $80 is trading at $25. The risk-free interest rate is 8% per annum with continuous compounding. Construct an arbitrage strategy. 7

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