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Simple Arbitrage for options: Meridian shares are trading at $5.40 per share. In one months...

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Finance

Simple Arbitrage for options:

Meridian shares are trading at $5.40 per share. In one months time, they will pay a 13 cent dividend. Interest rates (compounded continuously) are 1% per annum. A European call matures in 3 months time, with strike price $5.20. For the following three prices, $0.05, $0.10 and $5.30, is there an arbitrage opportunity? If so, how would you exploit it?

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