All options are european-style-what is the theoretical price

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Reference no: EM13928267

AIG stock sells at $61.21 and the 6-month 60-strike put is selling at $3.20. The risk-free rate is 4% and the stock will pay a dividend of $0.30 in 3 months. We assume that all options are European-style.

(a) What is the theoretical price of the 6-month 60-strike call?

(b) The 6-month call is selling at $4.95 on the market, show how you can benefit from this arbitrage opportunity. Show all details.

Reference no: EM13928267

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All options are european-style-what is the theoretical price : AIG stock sells at $61.21 and the 6-month 60-strike put is selling at $3.20. The risk-free rate is 4% and the stock will pay a dividend of $0.30 in 3 months. We assume that all options are European-style. What is the theoretical price of the 6-month ..

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