Suppose Company A's stock price is $100. There is a call option with an exercise price of
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Suppose Company A's stock price is $100. There is a call option with an exercise price of $110 and 1-year maturity. The price of the call option is $9. There is also a put option on Company A's stock with an exercise price of $110 and 1-year maturity. The price of the put option is $12. The risk-free rate is 5%. Is there an arbitrage opportunity here? What are we going to buy and sell?
Related Book For
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
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