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***This is from Investment and Financial Mathematics (IFM) course for Actuaries. Please give handwritten solution...

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***This is from Investment and Financial Mathematics (IFM) course for Actuaries. Please give handwritten solution with ALL steps shown plus with description because I need to understand the process. I will give "thumbs-up" for clear and correct solution. Thanks in advance!***

You are given the following prices for American call options: Strike Price Premium 40 5 50 4 55 3 To exploit the mispricing, you can sell one 50-strike option and buy x 40-strike options and y 55-strike options, with x and y selected to create an arbitrage. Determine the range of possible values of x. (Answer: x []; }]) You are given the following prices for American call options: Strike Price Premium 40 5 50 4 55 3 To exploit the mispricing, you can sell one 50-strike option and buy x 40-strike options and y 55-strike options, with x and y selected to create an arbitrage. Determine the range of possible values of x. (Answer: x []; }])

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