9.

Given: C = $5.25, P = $2.75, S = $48, K = $39, T = 6 months, r = 3.25% p.a.

a. What would you do to exploit these quotes? (List the transactions.) What would be your riskless arbitrage profit?

b. How could you synthetically short-sell an asset using only options and borrowing or lending at the risk-free rate? Would you be better off short-selling the stock, or synthetically short-selling it using options?