A european call option and put option on a stock both have, Ask an Expert

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A European call option and put option on a stock both have a strike price of $55 and an expiration date in two months. Both sell for $5. The risk-free interest rate is 10% per annum, the current stock price is $60, and a $2 dividend is expected in one month.

1- Identify the arbitrage opportunity open to a trader?

2- What is the present value of the trader’s profit?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91801410

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