The market value of a european call with strike

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The present price of a stock is 50. The market value of a European call with strike 47:5 and maturity 180 days is 4:375. The cost of a risk-free dollar in 180 days hence is 0:98. For a European put with a strike price of 47:5 you are quoted a price of 1:025. Show this is inconsistent with put-call parity. Describe how you can take advantage of this situation, by finding a combination of purchases and sales which provides an instant profit with no liability 180 days from now.

Reference no: EM131511934

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