Explain carefully the arbitrage opportunities

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Reference no: EM131237267

Explain carefully the arbitrage opportunities in Problem if the American put price is greater than the calculated upper bound.

Problem :
The price of an American call on a non-dividend-paying stock is $4. The stock price is $31, the strike price is $30, and the expiration date is in 3 months. The risk-free interest rate is 8%.

Derive upper and lower bounds for the price of an American put on the same stock with the same strike price and expiration date.

Reference no: EM131237267

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