An asset has value S0 = $120 at t = 0, and will have unknown value S(T) at time T. A call option with strike K = $100 is currently (t = 0) selling for C0 = $21, and the discount factor for the period 0 to T is e rT = 0.99 = 99/100. The risk-free rate is r. a) Consider the portfolio obtained by selling (short) one unit of the asset at t = 0, buying one call option, and investing the present value of the strike K in a bank at the risk-free rate. Show there is an arbitrage opportunity. Give all actions at t = T, and discuss the type of arbitrage. b) (559 only) If the call option price is instead C0 = $20, does the arbitrage opportunity still exist? What about C0 = $22? Discuss the type of arbitrage.