1. Is there an arbitrage in the following data? S=120, K= 119, r=4%, T=0.50, D=0, c=12, p=8 If this is the case, how much can be made risk-free? Include all steps necessary to describe the design of the trading strategy and the cash flows - at the time of portfolio set-up and time of maturity.

2. A non-dividend paying stock has a 6-month forward price of $120 and a (European) put option price p=14.63. The six-month interest rate is 5% (cont. compounding). Assuming no arbitrage is possible, what is the highest possible strike price K?