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Suppose you are given the following data: 2-month option on XYZ stock: Underlying S = 118.49 Strike X = 120 Put price = $2.1 A.

Suppose you are given the following data:

2-month option on XYZ stock:

Underlying S = 118.49

Strike X = 120

Put price = $2.1

A. What should be the price of call to prevent arbitrage if 2-month interest rate is 6% p.a.?

B. If the actual call price was $1.0, how would you implement an arbitrage opportunity?

C. Compute your payoff at maturity.

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