Question
Suppose the current price of a stock with continuous dividend yield 2% per annum is $10 per share. Suppose also the continuously compounded risk-free interest
Suppose the current price of a stock with continuous dividend yield 2% per annum is $10 per share. Suppose also the continuously compounded risk-free interest rate is 5% per annum. Determine whether there is an arbitrage opportunity for the following situation. Explain why.
The price of a European call option with strike price $10 and maturity 1 year is $0.4, and the price of a European put option with a strike price $11 and maturity one year is $0.1.
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Financial Management Principles And Applications
Authors: Sheridan Titman
9th Edition
0655705457, 9780655705451
