a company has never paid a dividend and has no plans to do so. It announced a 1-for-25 stock split to be taken into effect in August. PTN was trading at $0.23/share in August just prior to the stock split, and September European call options on 100 PTN shares with strike $0.21 were trading at $0.01. The risk-free interest rate is 5% p.a. continuously compounded for all maturities.

(a) Are there any arbitrage opportunities in which you earn an immediate profit? If there is, describe activities and cashflows for t=0 ONLY

(b) Would you answer to (a) change for an otherwise identical October American call option trading at the same price? Why or why not?