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  3. 1.) is there an arbitrage? assume: i) the continu

1.) Is there an arbitrage? Assume: i) The continuously compounded interest rate for lending...

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Finance

1.) Is there an arbitrage? Assume:

i) The continuously compounded interest rate for lending is 22.31%. and the continuously compounded interest rate for borrowing is 28.74%.

ii) The current stock price is $60. There are no dividends this year.

iii) A European call option with strike K = $80 and expiration T = 1 trades for $8. iv) A European put option with strike K = $80 and expiration T = 1 trades for $13.

v) There are no transaction costs.

vi)How does your answer change if there is a 10% tax on buying options, but no tax on selling options?

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