a = The price of a non-dividend-paying stock is $100 and the continuously compounded risk-free rate is 5%. A 1-year European call option with a strike price of $100 x 0.05x1 = $105.127 has a premium of $11.924. A 1 15 year European call option with a strike price of $100 x 0.05x1.5 $107.788 has a premium of $11.50. Demonstrate an arbitrage. 2 a = The price of a non-dividend-paying stock is $100 and the continuously compounded risk-free rate is 5%. A 1-year European call option with a strike price of $100 x 0.05x1 = $105.127 has a premium of $11.924. A 1 15 year European call option with a strike price of $100 x 0.05x1.5 $107.788 has a premium of $11.50. Demonstrate an arbitrage. 2