Question: Question 1 (3 marks) In an efficient market, a one-year call option on stock S with exercise price K = $30 is traded at $6.10,

Question 1 (3 marks) In an efficient market, a one-year call

Question 1 (3 marks) In an efficient market, a one-year call option on stock S with exercise price K = $30 is traded at $6.10, the current stock price So = $32.50, the expected market return is 6.5% p.a. compounded annually and the T-Bill yield is 3% p.a. compounded annually. You are about to purchase a one-year put option on the same stock with K = $31, someone offered it to you at a price of $3.80. Should you buy it? Why or why not

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