Suppose the current stock price is $100, the exercise price is $100, the annually compounded interest rate is 5 percent, the stock pays a $1 dividend in the next instant, and the quoted call price is $3 50 for a one year option Identify the appropriate arbitrage opportunity and show the appropriate...

The most likely arbitrage opportunity is a violation of a lower boundary condition With dividends th ...

Suppose the current stock price is $100, the exercise price is $100, the annually compounded interest rate

Question:

Suppose the current stock price is $100, the exercise price is $100, the annually compounded interest rate is 5 percent, the stock pays a $1 in the next instant, and the quoted call price is $3.50 for a one-year option. Identify the appropriate arbitrage opportunity and show the appropriate arbitrage strategy? Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...