A European call option and put option on a stock both have a strike price of $95 and an expiration date in one year. The call option sells for $16. The risk-free interest rate is 10% per annum, the current stock price is $100.

(1) Use put-call parity to find the price of the put option.

(2) If the put option sells for $1.00 in the marketplace, is it over-valued or under-valued?

(3) Identify the arbitrage opportunity open to a trader. How much is the profit? Use the following table to show your positions on date t (today) and the expiration day T.

Action	Cash flow at t	Cash flow at T
		if ST X, ST =110	if ST < X, ST = 90
Hint: Long or Short Put? -----------
Hint: Long or Short Stock? -------------
Hint: Long or Short Call? --------------
Hint: Borrow or Lend? --------------
Total