Question
(1) A stock price (which pays no dividends) is $50 and the strike price of a two year European put option is $54. The risk-free
(1) A stock price (which pays no dividends) is $50 and the strike price of a two year European put option is $54. The risk-free rate is 3% (continuously compounded). How low can the option price be without there being an arbitrage opportunity?(3 points)
A.$4.00
B.$3.86
C.$2.86
D.$0.86
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Contemporary Financial Management
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
10th Edition
978-0324289114, 0324289111
