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Adam Smith is a portfolio manager with Point72 Investments, a U.S.-based asset management firm. Smith is considering using options to enhance portfolio returns and control

Adam Smith is a portfolio manager with Point72 Investments, a U.S.-based asset management firm. Smith is considering using options to enhance portfolio returns and control risk. He asks his junior analyst, Tommy Lee, to help him. Lee collected the current market prices and data of selected instruments related to Lotus stock in Table 2. According to Table 2, What will be the arbitrage profit per share without considering the transaction cost? (Choose the best answer)

Table 2

European call option on Lotus stock

$3

European put option on Lotus stock

$4

Lotus stock price

$50

Time to expiration of options

4 months

Exercise price of options

$50

Risk-free rate

10%

Dividend to be paid in 3 months

$2

"

A)

0.30 to 0.40

B)

0.50 to 0.60

C)

0.20 to 0.30

D)

0.60 to 0.70

E)

0.40 to 0.50

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