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Demonstrate that a violation of put-call parity exists

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Reference no: EM132774606

Assume that you observe the following variables relating to a non-dividend-paying stock:

S = $39, X = $39, r = .08/annum, T = .25 years,

CE = $2.00, PE = $4.50

(A.) Demonstrate that a violation of Put-Call Parity exists.

(B.) How should this violation be exploited?

Clearly list every individual action step to be taken today and every individual action step to be taken 3 months from today.

Reference no: EM132774606

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