2. An American call option is written on a stock whose price today is S = 50....

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2. An American call option is written on a stock whose price today is S = 50. The exercise price of the call is X =

45. If the call price is 2, explain how you would use arbitrage to make an immediate profit.

If the option is exercisable at time T = 1 year and if the interest rate is 10 percent, what is the minimum price of the option? Use Proposition 1.

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Financial Modeling

ISBN: 9780262024822

2nd Edition

Authors: Simon Benninga

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Question Posted: Oct 17, 2024 11:02 AM

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2. An American call option is written on a stock whose price today is S = 50....

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Financial Modeling

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