Exercise 8.3.1 (1) Suppose that the time to expiration is 4 months, the strike price is $95, the call premium is $6, the put premium is $3, the current stock price is

$94, and the continuously compounded annual interest rate is 10%. How to earn a riskless arbitrage profit? (2) An options market maker writes calls to a client, then immediately buys puts and the underlying stock. Argue that this portfolio, called conversion, should earn a riskless profit.