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1. A fourmonth European put option on a nondividendpaying stock is currently selling for $2. The stock price is $45, the strike price is $50,

1. A fourmonth European put option on a nondividendpaying stock is currently selling for $2. The stock price is $45, the strike price is $50, and the risk-free interest rate is 12% per annum. Is there an arbitrage opportunity? Show the arbitrage 1Iansactions now and in four months. (10 marks)

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