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Q2) A European put option on a non-dividend paying stock with a strike price of $40 and an expiration date in six months costs $1.

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Q2) A European put option on a non-dividend paying stock with a strike price of $40 and an expiration date in six months costs $1. The stock price is $37 and the risk-free rate is 5% per annum. What arbitrage opportunities does this create and what is the minimum arbitrage profit in PV terms

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