Question 4 : (4 marks) Suppose you look in the newspaper and see IBM trading at $250
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Question 4 : (4 marks) Suppose you look in the newspaper and see IBM trading at $250 per share. Calls on IBM with one month to expiration and an exercise price of $245 are trading at $6.50 each. Puts on IBM with one month to expiration and an exercise price of $255 are trading at $3.50 each. Are these prices reasonable? If not explain how can you make arbitrage profit from this. (Ignore transactions costs).
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