Kindly assist in solving the following solutions. Please do it well.

(i) State what is meant by put-call parity. [2] (ii) By constructing two portfolios with identical payoffs at the exercise date of the options, derive an expression for the put-call parity of a European option that has a dividend payable prior to the exercise date. [6] (iii) If the equality in (ii) does not hold, explain how an arbitrageur can make a riskless profit. [3] [Total 11]Company X issues 3-month European call options on its own shares with a strike price of 120p. They are currently priced at 30 pence per share. The current share price is 123p and the current force of interest is o = 6% pa . (i) If dividends are payable continuously at a rate of q = 12% pa then calculate the fair price for put options on the share price at the same strike price. ii) Explain the strategy for arbitrage profit if, instead, the price of the put options is 25p