5-An investor paid $3 for an option that is curently out-of-the-money. If the underlying is priced at $37 which of the following best describes that option? a) A put option with a strike price of $40 b) A call option with a strike price of $38.5 c) A call option with a strike price of $34 d) A put option with a strike price of 40.5 e) The information is not enough to determine the answer The next two questions 6 and 7 are based on the following: A European call option and put option on a stock both have a strike price of S50 and expiration of six months; both sell for $3 in the market. The underlying price is $49 and the risk free rate is 10%. The stock is expected to pay $0.5 dividend in 1 month and 3 months respectively 6-Assume that the call is correctly priced. What should be the value of the put option according to the call-put parity? a) $3.00 b) $2.54 c) $3.61 d) $1.59 e) None of the above 7- What will be the arbitrage profit if any, if the stock price at expiration closes at $54 a) No arbitrage profit exists b) $1.51 c) $0.48 d) $0.76 e) None of the above