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1. Given the following data on a non-dividend paying stock: S=50 K=50 r=4% T=0.25 C=6 P=4 a) Determine whether or not put-call parity is
1. Given the following data on a non-dividend paying stock: S=50 K=50 r=4% T=0.25 C=6 P=4 a) Determine whether or not put-call parity is in effect (show your work). b) If put-call parity is not in effect, what would an investor need to do to create arbitrage profits? Be specific about how the investor would need to set up a portfolio and what the cash flows would be at inception and maturity of the portfolio.
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a Putcall parity is in effect when the prices of a European call option European put option and the ...Get Instant Access with AI-Powered Solutions
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