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Explain the arbitrage opportunities in the problem

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Reference no: EM132050038

Question: a) The price of a European call that expires in six months and has a strike price of $30 is $2. The underlying stock price is $29, and a dividend of $0.50 is expected in two months and again in five months. The continuously compounded interest rate is 10%. What is the price of a European put option that expires in six months and has a strike price of $30?

b) Explain the arbitrage opportunities in the earlier problem if the European put price is $3.

Reference no: EM132050038

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