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Put options with strikes of 70, 75, and 80 have option premiums of 4.00, 8.00, and 11.00, respectively. Given these information, in which way can
Put options with strikes of 70, 75, and 80 have option premiums of 4.00, 8.00, and 11.00, respectively. Given these information, in which way can you undertake an arbitrage?
I know the answer should be B, please show me how to get that so I can answer similar problems on my own.
(a) Buy a P(70), Short a P(75)
(b) Buy a P(70) and a P(80), Short two P(75)
(c) Short a P(75), Buy a P(80)
(d) It is impossible to make any arbitrage.
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