Using table of cash flows and determine arbitrage profit

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Reference no: EM132041966

The price of a non-dividend-paying stock is $38 and the price of a 3-month European put option on the stock with a strike price of $40 is $0.8. The risk-free rate is 10% per annum with continuous compounding. Are there any arbitrage opportunities? If yes, describe your arbitrage strategy using a table of cash flows and determine the arbitrage profit.

Reference no: EM132041966

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