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Suppose that you noticed the following prices: S = $ 6 0 ; K = $ 5 0 , for a one - year European

Suppose that you noticed the following prices: S

=

60

; K

=

50,

for a one

-

year European call option. The simple risk

-

free interest rate is

10 %

per year.

What must be the lower bound for the price of the Call option to prevent an arbitrage opportunity?

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