Suppose you observe a call option with a price of $2 and a strike of $10 for a share presently trading at $10.79. A put on the same stock with a strike of $10 is trading for $0.99. Both options have exactly 6 months to maturity. What must be the annual risk-free rate to ensure no arbitrage exists?

Answer rating: 100% (QA)

The annual risk free rate must be equal to the difference between the ... View the full answer