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Question 2 [ 1 0 points ] Assume, for a call option, S 0 = $ 2 0 , K = $ 1 6 ,

Question

2 [10

points

]

Assume, for a call option, S

0 =

20,

=

16,

= 10 %

per annum, and T

= 1

year. This

call option is sold in the market at $

2 .

Compute the profit of an arbitrageur when stock

price after

1

year is $

12 .

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