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Annum with continuous compounding

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The current share price of Ican plc is £2.26 per share. It offers a continuously compounded dividend yield of 2.00% per year. The volatility of its stock returns is 50% and risk free rate is 5%, both per annum with continuous compounding.

N(d1) =0.7224 N(d2) =05948 C =0.4724

Put options on Ican plc with a strike price of £2.00 and maturity in six months are trading at £0.30 per option. Does this offer an arbitrage opportunity? If yes, how can one take advantage of this opportunity? Fully illustrate your answer using 10 option contracts.

Reference no: EM132523965

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