A stock is trading at $114.63. The call option with the strike price of $115.00 is trading at a premium of $9.22. The put option with the same strike price is trading at $9.30. The time to expiry is 195 days and the continuously compounded risk free rate of return is 1.10%.

a. Calculate the theoretical price of the call option (1 mark)

b. Calculate the theoretical price of the put option (1 mark)

c. Which option is cheap and which option is expensive? (1 mark)

d. What trades would capitalise from this mispricing? (2 marks)

e. Calculate the profit from both trades (2 marks)

f. If 52 days later, this same stock were trading at $103.52 and the call and put options with a strike price of $105 were trading at $4.83 and $6.24 respectively, and there was no change in the continuously compounded risk free rate of return, describe a trade that may be executed to capitalise on any potential mispricing and calculate the potential profit