a) What is the price of a European put option on the same stock that expires in 8months and has a strike price of $90 b) Explain in detail the arbitrage opportunities if the European put price is $3.1. How much will be the arbitrage profit? c) Explain in detail the arbitrage opportunities if the European put price is $4.4. How much will be the arbitrage profit?

a) What is the price of a European put option on the same stock that expires in 8months and has a strike price of $90 b) Explain in detail the arbitrage opportunities if the European put price is $3.1. How much will be the arbitrage profit? c) Explain in detail the arbitrage opportunities if the European put price is $4.4. How much will be the arbitrage profit?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 4P: Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call...

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Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with a strike price of $32 and with 1 year until expiration has a current value of $6.56. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?
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