If the call options exercise price is $110. The current stock price is $100. When the market is good, the stocks price after 1 year is $130. When the market is bad, the stocks price is $90. The current interest rate is 10%.

Assuming that the calls current price is $9.0, the following table represents the strategy of constructing an arbitrage portfolio.

Cash flow in 1 year ActionsInitial cash flowS1=$90S2=$1301. Option: (X1*)(X4)(X8)(X12)2. Stock: (X2*)(X5)(X9)(X13)3. T-bill (X3*)(X6)(X10)(X14) (X7)(X11)(X15)

1. What is the fair option premium? Show your steps.
2. Fill in the blanks (X1-X11). Pay attention that for X1-X3, you have to identify what strategy to pursue (more specifically, X1: buy or sell how many option contracts? X2: long or short the stock? X3: borrow or lend in the T-bill market). For, X4-X11, you need to specify the dollar amount and pay attention to the direction (+ or -).