1. For European options on a stock, you are given: Strike Price, K. C(K,0.25) 10 2.30 11 1.40 12 1.50 You are also given, the annual continuously compounded risk-free rate of interest is 0.03 a. (1 point) State if an arbitrage opportunity exists. Explain. b. (1 point) If an arbitrage opportunity exists, show the quantity of each option that you would buy or sell to create the arbitrage. If there is not an arbitrage opportunity, then leave the table blank. Number of Options Buy Sell C(10,0.25) C(11,0.25) C(12,0.25) c. (3 points)If an arbitrage opportunity exists, show the cost of the trade and that there is no risk across the appropriate ranges of spot prices at expiration. 1. For European options on a stock, you are given: Strike Price, K. C(K,0.25) 10 2.30 11 1.40 12 1.50 You are also given, the annual continuously compounded risk-free rate of interest is 0.03 a. (1 point) State if an arbitrage opportunity exists. Explain. b. (1 point) If an arbitrage opportunity exists, show the quantity of each option that you would buy or sell to create the arbitrage. If there is not an arbitrage opportunity, then leave the table blank. Number of Options Buy Sell C(10,0.25) C(11,0.25) C(12,0.25) c. (3 points)If an arbitrage opportunity exists, show the cost of the trade and that there is no risk across the appropriate ranges of spot prices at expiration