Describe the arbitrage opportunity confronting

Reference no: EM131797315

Question: 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 a 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 $19and a $1 dividend is expected in one month, describe the arbitrage opportunity confronting you.

Reference no: EM131797315

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