The price of a non-dividend-paying stock is 100 and the, Financial Management

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The price of a non-dividend-paying stock is 100 and the

The price of a non-dividend-paying stock is $100 and the continuously compounded risk-free rate is 5%. A 1-year European call option with a strike price of $100 x e0.05x1.5=$105.127has a premium of $11.924. A 1-1/2 year European call option with a strike price of $100 x e0.05x1.5=$107.788 has a premium of $11.50. Demonstrate an arbitrage.

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Financial Management: The price of a non-dividend-paying stock is 100 and the

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Financial Management: The price of a non-dividend-paying stock is 100 and the

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