(a) Consider a stock with a current price of K100, a volatility of 0.3 (30\%), and a risk-free interest rate of 5%. An investor wants to price a European call option with a strike price of $110 and a time to expiration of 1 year. Using the Black-Scholes model, what is the theoretical price (Premium) of the call option? 12marks (b) Ms. Kabwe believes that a stock issued by a listed company is overpriced relative to other companies with equivalent risk profile. Based on her research, she believes demand and supply forces will push the price downwards to its fair value in a few days' time. She wishes to take advantage of this opportunity but is unsure of the best strategy to apply. Required: i. Briefly discuss the arbitrage pricing theory (3 marks) ii. Discuss short selling and Long selling and recommend an appropriate strategy to Ms. Kabwe 5 marks)