The current stock price is 1000 and the strike price is 900

Finance Jan 13, 2021

The current stock price is 1000 and the strike price is 900. The risk free interest rate is 10% per annum and the quoted three month call option price is 5 and put option price 4. Find out if there exists any arbitrage amount. Round all the numbers to two decimals

Expert Solution

Arbitrage amount is given as=S+P-C-X/(1+r)^t=1000+4-5-1000/(1+10%)^(3/12)=22.545910=22.55

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