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Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Single and multi-option arbitrage:

1. An investor has just obtained the following quotes for a European put option
on a non-dividend paying Cisco stock with a strike price of $40 and expiration
date in 6 months.
Stock price $37
Option price $1
Risk free rate 5% annual
Find an arbitrage opportunity.
Transcribed Image Text:1. An investor has just obtained the following quotes for a European put option on a non-dividend paying Cisco stock with a strike price of $40 and expiration date in 6 months. Stock price $37 Option price $1 Risk free rate 5% annual Find an arbitrage opportunity.
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