QUESTION 6 This question is based on the same straddle as the preceding question. For a one-year straddle on a nondividend-paying stock, you are given: 1. The straddle can only be exercised at the end of the year. 2. The payoff of the straddle is the absolute value of the difference between the strike price and the stock price at the expiration date. 3. The stock currently sells for $75.00. 4. The continuously compounded risk-free interest rate is 4%. 5. In one year, the stock will either sell for $95 or $68. 6. The option has a strike price of $85. Teresa notices that the straddle is selling for $14. She uses binomial option pricing model to determine if there is an arbitrage opportunity What transactions should Teresa enter into to exploit the arbitrage opportunity? O A Short shares of the stock, sell the straddle for $14, and borrow at the risk-free rate. OB. Short shares of the stock, sell the straddle for $14, and lend at the risk-free rate. C. Buy shares of the stock, buy the straddle for $14, and lend at the risk-free rate. OD. Buy shares of the stock, sell the straddle for $14, and lend at the risk-free rate. E. Buy shares of the stock, buy the straddle for $14, and borrow at the risk-free rate