You happen to be checking the newspaper and notice an arbitrage opportunity. The current stock price of
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You happen to be checking the newspaper and notice an arbitrage opportunity. The current stock price of Intrawest is $20 per share and the one-year risk-free interest rate is 8%. A oneyear put on Intrawest with a strike price of $18 sells for $3.33, while the identical call sells for
$7. Explain what you must do to exploit this arbitrage opportunity.
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