Question: Problem 1 Put-Call Parity, no dividends: c+ Ke-rt = p + So Suppose that the following is observed for two 9-month European options on a

Problem 1 Put-Call Parity, no dividends: c+ Ke-rt = p + So Suppose that the following is observed for two 9-month European options on a non-dividend paying stock: c=$7 So = $100 p= $9 K= $105 r= 10% per annum How can you take advantage of this arbitrage opportunity? What is the arbitrage profit? jous

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