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For a nondividend paying stock, you are given () The current stock price is 40. (ii) At the end of one month the stock price

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For a nondividend paying stock, you are given () The current stock price is 40. (ii) At the end of one month the stock price will be either 42 or 38. Assume that the continuously compounded risk-free interest rate is 0.08. (a) Calculate the current price of a 1-month 39-strike European call. (b) Identify an arbitrage strategy if the market price of the option is $1.5

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