A stock currently trades at $52. It is expected that dividends of $1.00/share will be paid to owners of the stock at 1 month and at 4 months from the current date. Consider these dates as ex-dividend dates as well. The continuously compounded risk free rate is 5%. European call and put options on the stock with exercise prices of $50 and 6 months to the expiration date are currently trading.

a) Calculate the lower bound for the value of the European call.

b) How would you arbitrage if the European call option has a market price (premium) of $1.00? In your answer clearly identify your position in each relevant instrument.