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Identify the arbitrage opportunity open to a trader

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Reference no: EM132715772

Problem 1: A European call option on a stock with a strike price of $75 and expiring in six months is trading at $5. A European put option on the stock with the same strike price and expiration as the call option is trading at $15. The current stock price is $64 and a $2 dividend is expected in three months. Zero coupon risk-free bonds with face value of $100 and maturing after 3 months and 6 months are trading at $99 and $98, respectively. Identify the arbitrage opportunity open to a trader.

Reference no: EM132715772

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