You are looking at options on ravenclaw corporation with 13, Ask an Expert

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You are looking at options on Ravenclaw Corporation with 13 months until expiration and a strike priceof $50. The risk free rate is 2.5% (annualized with continuous compounding, for 1 to 13 months). The firm is expected to pay a dividend of $1.20 each quarter (i.e. in 3, 6, 9 and 12 months) over the next 13 months, and the current stock price is $48.11. The price of the call option is $3.14 and the put option is $4.79. Find the arbitrage trade given these prices and show the profit for each contract.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92714507

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