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Exercise 4. The price of a non-dividend-paying stock is $19 and the price of a 3-month European call option on the stock with a strike
Exercise 4. The price of a non-dividend-paying stock is $19 and the price of a 3-month European call option on the stock with a strike price of $20 is $4. The price of a 3-month European put option with the same strike price is 3, the risk-free rate of interest is 10%.
What opportunities are there for an arbitrageur? Describe your arbitrage strategy using a table of cash flows and determine the arbitrage profit.
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