The below call option is European. What is the minimum arbitrage profit at time T=1Y arising from the following prices? So $19.63 = T=1Y K = $18 C = $2.77 r = 6% (cont. comp. annual rate) (required precision 0.01 +/- 0.01)

The below call option is European. What is the minimum arbitrage profit at time T=1Y arising from the following prices? So $19.63 = T=1Y K = $18 C = $2.77 r = 6% (cont. comp. annual rate) (required precision 0.01 +/- 0.01)

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

Problem 1PS

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Question

The below call option is European. What is the minimum arbitrage profit at time T=1Y
arising from the following prices?
So = $19.63
T=1Y
K = $18
C = $2.77
r = 6% (cont. comp. annual rate)
(required precision 0.01 +/- 0.01)

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