2. Suppose that a six-month futures price is currently at $48. A six-month European call option and a six month put option on the futures with a strike price of $50 are priced at $2.10 and $3.20, respectively, in the market. The risk free rate is 2x per annum. 12pts) . Show if an arbitrage opportunity exist LHS. R.H.S. b. State clearly how you would construct an arbitrage portfolio at Time 0. What will be your arbitrage profit? c. Demonstrate that there is no possibility in which you will lose money on the arbitrage portfolio you formed in Part (b) assuming that the futures price on expiration day is $40, S50 and $60. Futures Price on Exp Day, F Total Value Call T-B (FV=) Put 2 Futures T-Bill (FV) 10 50 2 2. Suppose that a six-month futures price is currently at $48. A six-month European call option and a six month put option on the futures with a strike price of $50 are priced at $2.10 and $3.20, respectively, in the market. The risk free rate is 2x per annum. 12pts) . Show if an arbitrage opportunity exist LHS. R.H.S. b. State clearly how you would construct an arbitrage portfolio at Time 0. What will be your arbitrage profit? c. Demonstrate that there is no possibility in which you will lose money on the arbitrage portfolio you formed in Part (b) assuming that the futures price on expiration day is $40, S50 and $60. Futures Price on Exp Day, F Total Value Call T-B (FV=) Put 2 Futures T-Bill (FV) 10 50 2