We consider a European purchase right to expire in 4 months. The right is written in a
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We consider a European purchase right to expire in 4 months. The right is written in a share that does not pay a dividend, the current price of which is 64 euros. It is given that the exercise price is 60 euros and the interest rate without risk is 12% (on an annual basis). The price of the right is 5 euros. Examine whether there is an arbitrage opportunity and whether it is necessary to show in detail the steps required to achieve it.
Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
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