An American option to buy PBA Ltd shares for $8.50 in exactly three months is priced at 48c.The next dividend of 50c will be paid in six months, and PBA's shares are currently trading for $8.70.Interest rates are 10% p.a. compounded quarterly.

i)What are the lower and upper bounds on the price of an American option to sell PBA's shares for $8.50 in three months?

ii)If the price of the put option was 35c, what initial position would exploit the arbitrage opportunity?