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The price of a stock, which pays no dividends, is $30 and the strike price of a one year European call option on the stock
The price of a stock, which pays no dividends, is $30 and the strike price of a one year European call option on the stock is $25. The risk-free rate is 4% (continuously compounded). What is a lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound?
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Foundations Of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
11th Canadian Edition
1259024970, 978-1259265921
