Question
A. Two European put options written on the same stock with the same time to maturity of one year are trading at p 1 =
A.Two European put options written on the same stock with the same time to maturity of one year are trading at p1 = $5.5, p2 = $0.7.The corresponding exercise prices are K1 = $30 and K2 = $25. The risk free interest rate is 10% per annual. Is there an arbitrage opportunity? How to take advantage of it?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
11th edition
324422870, 324422873, 978-0324302691
