3. A. Three European call options on the same stock with the samematurity are trading at c1 = $1.0, c2 = $1.5, and c3 = $2.0. Thecorresponding exercise prices are K1 = 20, K2 = 19, K3 = 16. Isthere an arbitrage opportunity? If so, how can you take advantageof it (use one contract in your calculation)?B. Two European put options written on the same stock with amaturity of one year are trading at p1 = $1.1, p2 = $0.1 Thecorresponding exercise prices are K1 = $20 and K2 = $19. Theriskfree interest rate is 1% per annual. Is there an arbitrageopportunity? If so, how can you take advantage of it (use onecontract in your calculation)?

B. Two European put options written on the same stock with amaturity of one year are trading at p1 = $1.1, p2 = $0.1 Thecorresponding exercise prices are K1 = $20 and K2 = $19. Theriskfree interest rate is 1% per annual. Is there an arbitrageopportunity? If so, how can you take advantage of it (use onecontract in your calculation)?