1) The current price of a stock is $67, and the continuously compounded risk-free rate is 6.5%. The stock pays a continuous dividend yield of 2%. A European call option with a exercise price of $70 and 1 year until expiration has a current value of $12.21. What is the value of a European put option written on the stock with the same exercise price and expiration date as the call?

a. $18.04

b. $12.21

c. $15.21

d. $12.13

e. $13.35

2) Suppose a stocks price is $39, and the continuously compounded interest rate is 6.5%. The stock does not pay dividends. A 1-year $35-strike European call costs $10.47, and a 1-year $35-strike European put costs $3.58. In this situation, an arbitrageur would...

a. sell the stock, buy the call, and sell the put.

b. sell the stock, sell the call, and buy the put.

c.buy the stock, buy the call, and sell the put.

d. buy the stock, sell the call, and buy the put.