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5. (25 points) A six-month European call option written on a non-dividend paying stock with...

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5. (25 points) A six-month European call option written on a non-dividend paying stock with an exercise price of $40 costs $2.87, the current stock price is $38 and the interest rate on a bank deposit per annum is 8%. a) Calculate the price of a six-month European put option on the same stock with the same exercise price. b) If the market price of the put option is $3.xx (where xx is the last two digits of your student number), is there an arbitrage opportunity? c) If so, define the arbitrage strategy

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