Prove that an arbitrage opportunity exists using put parity, Corporate Finance

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Prove that an arbitrage opportunity exists using put parity

Problem

XYZ shares are currently trading at $23. There are two options written on XYZ shares available in the market with the same strike of $24 and maturity of 18 months. Information regarding these two options is as follows:

1) Call options trading at $3.32. You calculate the fair price of this call option is $3.68.
2) Put options trading at $3.20. You calculate the fair price of this put option is $2.94.

The risk-free rate is 5% compounded continuously.

• Prove that an arbitrage opportunity exists using put and call parity.

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Corporate Finance: Prove that an arbitrage opportunity exists using put parity

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