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Assume the following: 1. You want to buy a one-year call option on a stock with a strike price of $25. 2. The current price
Assume the following: 1. You want to buy a one-year call option on a stock with a strike price of $25. 2. The current price per share of the stock is $23. 3. The stock does not pay a dividend. 4. The risk-free rate is 2.5% per year. 5. The price of a one-year put option on the same stock with the same strike price of $25 is currently $5. Using the put-call parity, what should be the price of the call?
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