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You are looking at the newspaper to observe the put and call option prices on ABC Ltd. The price of a one-year call option with

You are looking at the newspaper to observe the put and call option prices on ABC Ltd. The price of a one-year call option with a $13 strike price is $5. The current stock price of the firm is $15 per share and the one-year risk-free rate is 10%. Is there an arbitrage opportunity if the price of an identical put option is selling for $3? If there is, how much riskless profit you would earn by exploiting this opportunity? Clearly show what you must do to exploit this opportunity?

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