Which of the given statements is correct in given problem

Reference no: EM131965115

Question: The current price of a non-dividend paying stock is $40. A European call option with three months maturity and strike $39 is priced at $2. The risk free rate of interest for three months is 2%. Which of the following statements is correct?

(a) The price of the call obeys no-arbitrage restrictions.

(b) It is possible to construct a risk-less arbitrage strategy to yield a gain of at least $0.81.

(d) It is possible to construct a risk-less arbitrage strategy to yield a gain of at least $1.19.

Reference no: EM131965115

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