>> Financial Management
Suppose that you noticed the following prices: P=$48; S=$4; X=$50, for a one year European put option.
The simple risk-free interest rate is 10% per year. Is there an arbitrage profit opportunity here? Yes or no?
If yes, how would you exploit it? If no explain why not.
PS: In all questions above X = the exercise price of the options, C = call premium, P = put premium
please show detailed answer