Multiple Choice
In a one-period binomial model,assume that the current stock price is $100,and that it will rise to $110 or fall to $90 after one month.If an investment of a dollar at the risk-free rate returns $1.001668 after one month,and the 98-strike put option is trading at $2,how much arbitrage profit can you make in present value terms?
A) $1.93
B) $2.92
C) $3.93
D) $8.00
Correct Answer:
Verified
Correct Answer:
Verified
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