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

Use your textbook to answer the following questions from Chapter 10:

Exercise 21 and 22.

Please, upload xls, xlsx file.
Please, use the full computing power of Excel.

21. stock is trading at S = 50. There are one-month European calls and puts on the stock
with a strike of 50. The call is trading at a price of CE = 3. Assume that the one-month
rate of interest (annualized) is 2% and that no dividends are expected on the stock over
the next month.

(a) What should be the arbitrage-free price of the put?
(b) Suppose the put is trading at a price of PE = 2.70. Are there any arbitrage opportunities?

22. A stock is trading at S = 60. There are one-month American calls and puts on the
stock with a strike of 60. The call costs 2.50 while the put costs 1.90. No dividends
are expected on the stock during the options’ lives. If the one-month rate of interest
(annualized) is 3%, show that there is an arbitrage opportunity available and
explain how to take advantage of it.