Answer Happy

Suppose the current stock price is $110. The premium of a call option for this stock with an exercise price of $105 with 1 year to expiration is $13, while the premium for a put option for this stock with he same expiration and exercise price as the call option is $5. The risk-free rate is 5% per year. How can you exploit an arbitrage condition with the provided information? Purchase the put option and lend $100 while writing the call option and short selling the stock O Purchase the call option and lend $100 while writing the put option and short selling the stock O Purchase the stock and the put option while writing the call option and borrowing $100 for one year No arbitrage opportunity is present Purchase the stock and the call option while writing the put option and borrowing $100 for one year