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Google stock currently sells for 80 dollars a share. It has an equal chance of going up or down 5% over the next year, each
Google stock currently sells for 80 dollars a share. It has an equal chance of going up or down 5% over the next year, each with probability 1/2. The risk free rate is 0%. If a call option on Google of strike price 78 sells for 1 dollar and 75 cents, how would you exploit this arbitrage opportunity to make money today without having to pay anything in the future?
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