Arbitrage opportunity with options you are studying

Assignment Help Financial Management

Reference no: EM131464394

You are in a situation that you suspect there is an arbitrage opportunity with options you are studying. You are looking at a European call option and a European put option on a stock in which both have an exercise prices of $20 and 3 months to expiration. They both happen to sell for $3 and the risk-free interest rate is 10% per annum. If the current stock price is $19 and a $1 dividend is expected in one month, describe the arbitrage opportunity confronting you.

Reference no: EM131464394

Questions Cloud

Use dividend-discount model to estimate its value per share : Procter and Gamble? (PG) paid an annual dividend of $ 1.61 in 2009. use the? dividend-discount model to estimate its value per share at the end of 2009.

Calculate the NPV of FCF associated with each alternative : calculate the NPV of the FCF associated with each alternative. The NPV of renting the machine is $?

Most important decisions made by firms management : capital investments are considered the most important decisions made by a firm’s management.

Chains? in-house instead of purchasing them from supplier : what is the net present value of the decision to produce the chains? in-house instead of purchasing them from the? supplier?

Arbitrage opportunity with options you are studying : You are in a situation that you suspect there is an arbitrage opportunity with options you are studying.

Calculate the price of european put option : Calculate the price of a European put option with a six-month expiration and a strike price of $30.

Certain stock pays no dividends and is priced by the market : A certain stock pays no dividends and is priced by the market at $19.

How much are you being offered for your company : You have successfully started and operated a company for the past 10 years. If you require an EAR of 9 percent, how much are you being offered for your company?

What are the free cash flows of the project : Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements by body builders. What are the free cash flows of project?

User Account

All Pages