There is no additional info provided. A stock's current price is $$40.$ The exercise price on the underlying option is also

$$40.$ The appropriate risk$-$free rate is $4\mathrm{.}5\%.$ It is your belief that the stock price will

move up by $15\%$ or down by $10\%$ prior to expiration of the option. Show all of your

calculations.

a$.$ If the call option were trading in the market at $$3\mathrm{.}50,$ what would be an

appropriate strategy?

b$.$ Compare your portfolio at time $0$ with your portfolio value at expiration if the

underlying stock decreased by the expected amount. Determine the rate of return.

c$.$ Do you have an investing or borrowing situation? How do you know?

d$.$ What would the put value be under these same circumstances if the put option

were trading in the market at $$1\mathrm{.}25?$