A stock price (which pays no dividends) is $48 and the strike price of a...
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Finance
A stock price (which pays no dividends) is $48 and the strike price of a two year European put option is $54. The risk-free rate is 3% (continuously compounded). Which of the following is a lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound?
$4.00
$3.86
$2.86
$0.86
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