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It is currently Nov 1 and the stock price for ZZZ Corp is 113.25. The risk-free rates are 7.30% (Nov), 7.50% (Dec) and 7.62%(Jan). The

It is currently Nov 1 and the stock price for ZZZ Corp is 113.25. The risk-free rates are 7.30% (Nov), 7.50% (Dec) and 7.62%(Jan). The expiration dates for the options are Nov 15, Dec 20, and Jan 17. Assume the options are European and no dividends are paid.

Calls

Puts

Strike

Nov

Dec

Jan

Nov

Dec

Jan

105

8.4

10

11.5

1.3

1.3

2

110

4.4

7.1

8.3

0.9

2.5

3.8

115

1.5

3.9

5.3

2.8

4.8

4.8

Question 1 options:

Using the options data from the spreadsheet FNCE4408_Assignment-02.xlsx, do the Nov 105 CALL and PUT options represent an arbitrage opportunity? (Answer YES or NO. Hint use the put-call parity)

If so, the arbitrage strategy would be to:

1. (Answer BUY or SELL)

the CALL option.

2. (Answer INVEST or BORROW)

the PV(X), which amounts to (Answer should be to 2 decimal places and no dollar sign)

3. (Answer BUY or SELL)

the PUT option, and

4. 1. (Answer BUY or SHORT)

the STOCK

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