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Consider a stock that is worth $50. A European put and a European call on this stock have an exercise strike price of $50 and
Consider a stock that is worth $50. A European put and a European call on this stock have an exercise strike price of $50 and expire in one year. The call costs $5 and the put costs $4. A risk-free bond will pay $50 in one year and costs $45. Is there an arbitrage opportunity? If so, state what transactions you would make and the present value of how much profit you would earn at expiration.
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