Question
The price of ABC stock, which pays no dividends, is $86.51 and the strike price of a one year European call option on the stock
The price of ABC stock, which pays no dividends, is $86.51 and the strike price of a one year European call option on the stock is $81.03. The risk-free rate is 4.76% (continuously compounded). Which of the following 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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Cost Of Capital Applications And Examples
Authors: Shannon P. Pratt, Roger J. Grabowski, Richard A. Brealey
5th Edition
1118555805, 9781118555804
