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Idea the following two strategies: Buy a 6-month European put option on XYZ stock with strike price 55 and premium of 3.70. Write a 6-month

Idea the following two strategies:

  • Buy a 6-month European put option on XYZ stock with strike price 55 and premium of 3.70.

  • Write a 6-month European call option on XYZ stock with strike price 55 and premium of 2.50.

    The continuously compounded risk-free interest rate is 3%. Let S be the price of XYZ stock after 6 months.

    Determine the values of S for which the first strategy has a higher profit than the second strategy.

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