Q4. The following table shows the stock price, S, and options premiums for several strike prices and expiration dates. K

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Q4 The Following Table Shows The Stock Price S And Options Premiums For Several Strike Prices And Expiration Dates K 1 (246.18 KiB) Viewed 45 times

Q4. The following table shows the stock price, S, and options premiums for several strike prices and expiration dates. K Calls Puts NOV DEC JAN NOV DEC JAN 25.20 7.30 .10 .55 sk 20 25.20 22.50 3.20 3.40 .60 1.25 25.20 25 1.50 4.00 1.40 1.95 2.10 25.20 27.50 .60 .88 3.50 4.00 25.20 30 .16 .55 .90 5.10 5.40 5.50 4.1 The options are American; the stock does not pay dividends; the annual risk- free rate is 5% with continuous compounding, and the NOV options have exactly 1 month to expiration. Check the put - call inequality for American options for the NOV, K = 25 options, 4.2 If you find in 4.1 that the inequality does not hold, develop a strategy that will produce arbitrage profit and use a table of cash flows to describe the strategy and calculate the arbitrage profit.