What’s wrong here? Describe how you can take advantage of this mispricing if the option expires today

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 1P
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Option Pricing You notice that shares of stock in the Patel Corporation are going for $50 per
share. Call options with an exercise price of $35 per share are selling for $10. What’s wrong here?
Describe how you can take advantage of this mispricing if the option expires today

 

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