Question
Company XYZ current stock price is $70 and pays no dividends. An American 1 -year stock call option is $20 and has a strike price
Company XYZ current stock price is $70 and pays no dividends.
An American 1 -year stock call option is $20 and has a strike price of $70
The 1 year interest rate is 10%pa (continuously compounding)
1)Is the call free from arbitrage?
2)Is the call free from arbitrage if a dividend of $5 is received in 1 year?
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Practical Financial Management
Authors: William R. Lasher
8th edition
1305637542, 978-1305887237, 1305887239, 978-1305637542
