A one$-$month $($maturing in a month$)$ European call option on a non$-$dividend$-$paying stock is currently selling for $$4\mathrm{.}50.$ The stock price is $$55,$ the strike price is $$50,$ and the risk$-$free interest rate is $6\%$ per

annum with continuous compounding. How can you arbitrage?

$[$Hint:

Max$[S_0-K{e}^{-rT},0]c{S}_0$ where $c$ is the call price today, $S_0$ is the stock price, $K$ is the strike price, $r$ is the risk free rate with continuous compounding rate, and $T$ is the time to maturity.

Buying a risk$-$free bond is equivalent to lending at a risk$-$free rate. Selling a risk$-$free bond is equivalent to borrowing at a risk$-$free rate.$]$

A$.$ Short call, long stock, borrow money $(S_0-c)$ at risk free rate

B$.$ Long call, long stock, borrow money $(S_0+c)$ at risk free rate

C$.$ Short call, short stock, lend money $(S_0+c)$ at risk free rate

D$.$ Long call, short stock, lend money $(S_0-c)$ at risk free rate