The price of a non-dividend paying stock is 18 and the, Financial Management

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The price of a non-dividend paying stock is 18 and the

The price of a non-dividend paying stock is $18 and the price of a 3-month European call option on the stock with a strike price of $20 is $1. The risk-free is 4% per annum, continuously compounded. Please show your work.

a. What should be the price of a 3-month European put option with a strike price of $20? b. Explain what arbitrage opportunity exists if the European put option price is $2?

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Financial Management: The price of a non-dividend paying stock is 18 and the

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