Exhibit 13-6
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT

question 54

Multiple Choice

Exhibit 13-6
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S)
The current stock price of ABC Corporation is $53.50. ABC Corporation has the following put and call option prices that expire 6 months from today. The risk-free rate of return is 5% and the expected return on the market is 11%. $\begin{array}{ccc}\text { Exercise Price } & \text { Put Price } & \text { Call Price } \\\hline50 & \$ 1.50 & \$ 5.75 \\55 & \$ 3.25 & \ldots\end{array}$
-Refer to Exhibit 13-6. How could an investor create arbitrage profits?

• A) Sell the stock short, write a put, buy a call and invest the proceeds at the risk-free rate.
• B) Buy the stock, write a put, buy a call and invest the proceeds at the risk-free rate.
• C) Sell the stock short, buy a put, write a call and invest the proceeds at the risk-free rate.
• D) Buy the stock, write a put, buy a call and borrow the strike price at the risk-free rate.
• E) Sell the stock short, write a put, buy a call and borrow the strike price at the risk-free rate.

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Definitions:

1970s

A decade known for significant political, social, and technological changes that impacted various global contexts.

Coercing

The act of persuading or influencing someone to do something by using force or threats.

Common Goal

A shared objective or purpose among individuals or groups that motivates collective action.

Try Something New

The act of engaging in activities or experiences that are unfamiliar.