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A call option on a stock is trading for $1.80. The option matures in two months, the exercise price of the option is $50. The
A call option on a stock is trading for $1.80. The option matures in two months, the exercise price of the option is $50. The stock is currently trading for $52, and the risk free interest rate is 12%. Examine if there is an arbitrage oppurtunity in this problem. If so, show how it can be exploited to make a riskless profit. Consider both European and American options.
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