1. A put option on a stock is currently selling for a premium of $2. The strike price is $59. The stock is selling for $53. The interest rate is 10% and the time to maturity is 6 months. How can you exploit the arbitrage?

a) buy the put, short the stock and borrow Xe^-rT.

b) buy the put, short the stock and invest Xe^-rT.

c) sell the put, short the stock and borrow Xe^-rT.

d) buy the put, buy the stock and borrow Xe^-rT. *

e) sell the put, short the stock and invest Xe^-rT.

EXPLAIN AND CLARIFY, NO EXCEL