Find the arbitrage strategy

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There is a two-year European put option on a non-dividend-paying stock when the stock price is $42, the strike price is $50, and the risk-free interest rate is 5% per annum. Suppose the price of the put option is $2, is there an arbitrage in the market? If so, find the arbitrage strategy and its resulting cash flows.

Reference no: EM133070005

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