Suppose the following for European options: Stock price $94 3-month call options with strike price $97 3-month put option with strike price $98 l-year risk-free rate is 3%. The put option is trading at $5 and there is an identical call option that is trading for $4. The arbitrage gain that can be made is equal to: O a. $2.00 b. $0.27 Oc. $3.00 Od $1.27 O $2.27

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Suppose the following for European options:
Stock price $94
3-month call options with strike price $97
3-month put option with strike price $98
1-year risk-free rate is 3%.
The put option is trading ot $5 and there is an identical call option that is trading for $4. The arbitrage gain that
can be made is equal to:
O a. $2.00
b. $0.27
Oc. $3.00
O d. $1.27
O e $227
Transcribed Image Text:Suppose the following for European options: Stock price $94 3-month call options with strike price $97 3-month put option with strike price $98 1-year risk-free rate is 3%. The put option is trading ot $5 and there is an identical call option that is trading for $4. The arbitrage gain that can be made is equal to: O a. $2.00 b. $0.27 Oc. $3.00 O d. $1.27 O e $227
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