1. (20 pts) Please write the solution for this problem on paper a) (10 pts) Suppose that the stock price is $31, the risk-free interest rate is 9% per year, the price of a three-month European call option is $2.69, and the price of a 3-month European put option is $2.25. Both options have the strike price $29. Assume monthly compounding. Describe an arbitrage strategy and justify it with appropriate calculations. Please write your solution in complete sentences. b) (10 pts) Use the same data as in part (a), but suppose now that the call price is $3.90 and the put price is $1.25. Assume monthly compounding. Is there still an arbitrage opportunity? Describe an appropriate strategy and justify it with appropriate calculations. Please write your solution in complete sentences te strategy compound is now thay 1. (20 pts) Please write the solution for this problem on paper a) (10 pts) Suppose that the stock price is $31, the risk-free interest rate is 9% per year, the price of a three-month European call option is $2.69, and the price of a 3-month European put option is $2.25. Both options have the strike price $29. Assume monthly compounding. Describe an arbitrage strategy and justify it with appropriate calculations. Please write your solution in complete sentences. b) (10 pts) Use the same data as in part (a), but suppose now that the call price is $3.90 and the put price is $1.25. Assume monthly compounding. Is there still an arbitrage opportunity? Describe an appropriate strategy and justify it with appropriate calculations. Please write your solution in complete sentences. 1. (20 pts) Please write the solution for this problem on paper a) (10 pts) Suppose that the stock price is $31, the risk-free interest rate is 9% per year, the price of a three-month European call option is $2.69, and the price of a 3-month European put option is $2.25. Both options have the strike price $29. Assume monthly compounding. Describe an arbitrage strategy and justify it with appropriate calculations. Please write your solution in complete sentences. b) (10 pts) Use the same data as in part (a), but suppose now that the call price is $3.90 and the put price is $1.25. Assume monthly compounding. Is there still an arbitrage opportunity? Describe an appropriate strategy and justify it with appropriate calculations. Please write your solution in complete sentences te strategy compound is now thay 1. (20 pts) Please write the solution for this problem on paper a) (10 pts) Suppose that the stock price is $31, the risk-free interest rate is 9% per year, the price of a three-month European call option is $2.69, and the price of a 3-month European put option is $2.25. Both options have the strike price $29. Assume monthly compounding. Describe an arbitrage strategy and justify it with appropriate calculations. Please write your solution in complete sentences. b) (10 pts) Use the same data as in part (a), but suppose now that the call price is $3.90 and the put price is $1.25. Assume monthly compounding. Is there still an arbitrage opportunity? Describe an appropriate strategy and justify it with appropriate calculations. Please write your solution in complete sentences