easy · CFA Level I derivatives
Vesper Foods stock is at 60. A European call with K = 55 is 8.00. A European put with K = 55 is 2.00. If PV(K) = 54.50, determine if an arbitrage opportunity exists.
- Yes, because 8.00 + 54.50 = 62.50 while 2.00 + 60 = 62.00.
- Yes, because the call premium is more than three times the put premium.
- No, because the difference in option premiums (6.00) equals the intrinsic value of the call.
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