Compare the present value of this cash flow to the option, Financial Management

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Compare the present value of this cash flow to the option

Suppose the call option had been underpriced, selling at $5.50. Formulate the arbitrage strategy to exploit the mispricing, and show that it provides a riskless cash flow in one year of $.6167 per option purchased. Compare the present value of this cash flow to the option mispricing.

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Financial Management: Compare the present value of this cash flow to the option

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Financial Management: Compare the present value of this cash flow to the option

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