1 Simple arbitrage for options Bell South shares are trading at $25.75 per share. In three months time, they will pay a 27 cent dividend. Interest rates (with continuous compounding) are 3% per annum. For the following two situations, demonstrate how you would arbitrage the market: 1. A European call option, maturing in four months time, with strike price $24 has price $1.65 2. A European call option, maturing in four months time, with strike price $24 has price $1.80, while a European put option, maturing in four months time, with strike price $24 has price $0.25