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Arbitrage Using Options on Dividend-Paying Stock I A stock currently sells for $80 and will pay $5-dividend in year 1 and year 2. 3-year European
Arbitrage Using Options on Dividend-Paying Stock I A stock currently sells for $80 and will pay $5-dividend in year 1 and year 2. 3-year European put option on this stock has the strike price of $80. The put price is $4. The risk-free rate is 2% per annum. Is there an arbitrage? If so, find the arbitrage strategy and its cash flows.
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