A put is worth ($ 10) and matures in one year. A call on the same stock
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A put is worth \(\$ 10\) and matures in one year. A call on the same stock is worth \(\$ 15\) and matures in one year also. Both options are European. The put and call have the same exercise price of \(\$ 40\). The stock price is \(\$ 50\). The current price of a (risk free) discount bond (zero coupon bond) paying \(\$ 1\) that matures in one year is \(\$ 0.90\). How do you make risk free profits given these prices?
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Related Book For
Lectures On Corporate Finance
ISBN: 9789812568991
2nd Edition
Authors: Peter L Bossaerts, Bernt Arne Odegaard
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