How can you exploit this arbitrage opportunity

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Reference no: EM134040334

Question

You observe the following: The current stock price of Bat Mania is $20 per share. The one-year risk-free interest rate is 4.2%.

A one-year put on Bat Mania with a strike price of $18 sells for $.75, while the identical call sells for $4.00. How can you exploit this arbitrage opportunity?

Reference no: EM134040334

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