a. Let the underlying asset be called asset A, and the strike asset, asset B. Let Sy be the price at time t of asset A and Qt that of asset B. Let FT(S) denote the time t price of the prepaid forward on asset A, paying Sy at time T. Let Fr(Q) denote the time t price of the prepaid forward on asset B, paying Qr at time T. Using the comparison principle to show that C(S, Q1, T - t) - P(S.,Q..T - t) = F (S) - F(0) (10 marks) b. You are given that the market European put option for n years is Po, market European call option for n years is Co. Both European options are having the same strike price K. The annual effective interest rate is r continuously compounded, and the continuous dividend yield is 8. Suppose that the arbitrage-free put value is Po + Co. Determine the arbitrage profit today by demonstrating the arbitrage. (10 marks) c. Using the put-call parity to determine the two factors that caused the American call option on non-dividend paying stock not reasonable to exercise. (5 marks) a. Let the underlying asset be called asset A, and the strike asset, asset B. Let Sy be the price at time t of asset A and Qt that of asset B. Let FT(S) denote the time t price of the prepaid forward on asset A, paying Sy at time T. Let Fr(Q) denote the time t price of the prepaid forward on asset B, paying Qr at time T. Using the comparison principle to show that C(S, Q1, T - t) - P(S.,Q..T - t) = F (S) - F(0) (10 marks) b. You are given that the market European put option for n years is Po, market European call option for n years is Co. Both European options are having the same strike price K. The annual effective interest rate is r continuously compounded, and the continuous dividend yield is 8. Suppose that the arbitrage-free put value is Po + Co. Determine the arbitrage profit today by demonstrating the arbitrage. (10 marks) c. Using the put-call parity to determine the two factors that caused the American call option on non-dividend paying stock not reasonable to exercise