Question
A stock currently sells for $90 and will pay $5-dividend in year 1. 2-year European call option on this stock has the strike price of$80.
A stock currently sells for $90 and will pay $5-dividend in year 1. 2-year European call option on this stock has the strike price of$80. The call price is $9. The risk-free rate is 4% per annum. Is there an arbitrage? If so, find the arbitrage strategy and its cash flows.
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Investment Science
Authors: David G. Luenberger
1st Edition
0195108094, 978-0195108095
