Question: Question 32 A put with exercise price = $40 and 90 days expiry costs $1 the corresponding call option with the same exercise price costs

Question 32

  1. A put with exercise price = $40 and 90 days expiry costs $1 the corresponding call option with the same exercise price costs $5. Risk free rate = 5% and stock price = $42. compute the net profits from any arbitrage.

    1.

    net profit = $2.2
    2.

    net profit = $1.5
    3.

    net profit = $2.4
    4.

    net profit = $1.2
    5.

    net profit = $2.6

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