What should be the price of an european put on a stock that


Assuming the following data, what should be the price of an European put on a stock that pays no dividends? Is there an arbitrage opportunity? Explain the strategy and determine the payoffs at maturity.

Actual value of the stock = US$ 70

Strike price = US$ 73

Duration = 4 months

Rf = 5% per year

p*=1.5 (market price of put)

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Financial Management: What should be the price of an european put on a stock that
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