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KASTs stock is currently selling for $50 a share. A one-year call option with a...

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Accounting

KASTs stock is currently selling for $50 a share. A one-year call option with a strike price of $45 on KASTs stock is priced at $8, and a one-year put option on the same stock with a strike price of $45 is selling for $3. The risk-free rate is 5%.

A. Explain why there is an arbitrage opportunity that you can exploit? (2 marks)

B.How could you exploit such an opportunity? (6 marks)

C.What would be your arbitrage profit? (2 marks)

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