Show how an arbitrage profit can be made

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Reference no: EM131324272

We briefly mentioned the synthetic call, which consists of stock and an equal number of puts. Assume that the combined value of the puts and stock exceeds the value of the actual call by less than the present value of the exercise price. Show how an arbitrage profit can be made.

Note: Do not use the data from the chapter. Show your point as it was illustrated in the text for the synthetic put.

Reference no: EM131324272

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