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Business, 07.11.2019 20:31 jalst6084

You are looking at options on ravenclaw corporation with 13 months until expiration and a strike price of $50. the risk free rate for maturities between 1 and 13 months is 2.5% (annualized with continuous compounding). the firm is expected to pay a dividend of $1.20 each quarter over the next 13 months (i. e. a $1.20 dividend in 3, 6, 9 and 12 months), and the current stock price is $48.11. the price of the call option is $3.14 and the put option is $4.79. find the arbitrage trade given these prices and show the profit for each contract.

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