Task 

In this assignment, you will solve problems on No-arbitrage Restrictions, Early Exercise and Put-Call Parity.

Instructions 

1. Use your textbook to answer the following questions from Chapter 9:
   1. Exercise 12 and 13.
2. Please, upload xls, xlsx file.
3. Please, use the full computing power of Excel.

12. The current price of a stock is $60. The one-year call option on the stock at a strike of

$60 is trading at $10. If the one-year rate of interest is 10%, is the call price free from

arbitrage, assuming that the stock pays no dividends? What if the stock pays a dividend

of $5 one day before the maturity of the option?

13. The current price of ABC stock is $50. The term structure of interest rates (continuously

compounded) is flat at 10%. What is the six-month forward price of the stock?

Denote this as F. The six-month call price at strike F is equal to $8. The six-month

put price at strike F is equal to $7. Explain why there is arbitrage opportunity given

these prices.