Jillo,Inc.stock is selling for $54.70 per share.Calls and puts with a $55 strike and 40 days until expiration are selling for $1.65 and $1.23,respectively.What potential arbitrage profit exists?
A) $0.12
B) $0.24
C) $0.36
D) $0.48

Question

Quizplus · Accepted Answer

The potential arbitrage profit is calculated by using the put-call parity formula: Call - Put = Stock Price - Strike Price. Here, $1.65 (Call) - $1.23 (Put) = $0.42, and $54.70 (Stock Price) - $55 (Strike Price) = -$0.30. The difference is $0.12, indicating an arbitrage profit of $0.12.

Jillo,IncStock Is Selling for $54