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The price of a European call that expires in six months and has a strike price of $30 is $2. The underlying stock price is
The price of a European call that expires in six months and has a strike price of $30 is $2. The underlying stock price is $29, and a dividend of $0.50 is expected in two months and again in five months. The term structure is flat, with all risk- free interest rates being 10%.
Explain carefully the arbitrage opportunities if the European put price is $3.
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