7. A European call with a maturity of six months and exercise price X = 80 written...

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7. A European call with a maturity of six months and exercise price X = 80 written on a stock with a current price of 85 is selling for $12.00; a European put written on the same stock with the same maturity and with the same exercise price is selling for $5.00. If the annual interest rate (continuously compounded) is 10 percent, construct an arbitrage from this situation.

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Financial Modeling

ISBN: 9780262024822

2nd Edition

Authors: Simon Benninga

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