Question: Rice is worth initially $256. This commodity is the underlying of a European Call and Put, having the same maturity of 11 months and the

Rice is worth initially $256. This commodity is the underlying of a European Call and Put, having the same maturity of 11 months and the same strike price K=$275. Initially, the Call and Put are worth $9 and $22, respectively.

a) Find the theoretical risk-free rate.

b) If the observed risk-free rate is 5%, how can you extract arbitrage profits?

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