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Is there an arbitrage profit opportunity here
Course:- Financial Management
Reference No.:- EM13891882




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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




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