Question
You observed following prices for options on ZM stock: $2.50 for a call and $3.00 for a put. Both options have an exercise price of
You observed following prices for options on ZM stock: $2.50 for a call and $3.00 for a put. Both options have an exercise price of $50 and will expire in 6 months. The interest rate on t-bills is 2.9% per annum. The stock of ZM is currently trading at $50 with a standard deviation of 25% per year. ZM does not pay any dividends. Are there any arbitrage opportunities? If yes, explain how to arbitrage including the transactions involved and compute the arbitrage profit. If not, explain why not.
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Investment Analysis and Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
10th Edition
538482109, 1133711774, 538482389, 9780538482103, 9781133711773, 978-0538482387
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