1. Table Al lists the European option prices on a stock that pays no dividends on a given date. Time to option expiration is 2 months, and the risk-free rate (cont. compounded) is 6 percent. Table Al Strike price Call Put 165 8 2.5 170 6.3 5.15 175 2.95 7 a) If a trader creates a 165/175 box spread, explain whether there is any opportunity for a box-spread arbitrage. If this is the case, describe how it can be exploited. b) Graph the box spread and indicate the pattern of profits from this trading in the figure. c) Explain why treating American options as European when creating a box spread can lead to significant losses