financial derivatives, please consider the hints and provide correct answer and calculation process. Thanks a lot for your kind help.

Question 4 A Bookmark this page Homework due Jan 27, 2021 23:00 CST Completed Question 4 3.0/10.0 points (graded) Consider two European call options on the stock of XYZ. Both options mature one year from now. The first option (Option #1) has a strike price of $40.0 and trades at $19.8 today; the second option (Option #2) has a strike price of $55.0. Currently, the stock price is equal to $55.4, and the one-year continuously-compounded risk-free rate is 3%. The stock does not pay dividends. Note that you will get partial credits for the problem and hints under the submission box. We've increased the number of attempts to 15, so don't give up! What is the lowest price of the second option (Option #2) consistent with absence of arbitrage? 2.02 That's a good first step, but the answer is not correct yet because there is a higher bound. Hint: Try to construct a portfolio consisting of Option #2 and a discount bond that provides at least as high payoff at expiration as Option #1. The price of this portfolio should be at least as high as the price of Option #1, which would give you the lower bound on the price of Option #2. Please round your answers to at least two digits. e.g., if the answer is 19/17, submit 1.12. 1.1 will be marked as incorrect! 1.1176 will be accepted