Assume that a call price of a stock warrant sold (1-year expiration and strike price = $80) is $9.0, a put price on the same underlying stock (1-year expiration and strike price = $80) is $2.5, $0.50 dividend per share will be paid in 12 months, continuously compounded risk-free interest rate is 2% per year, and the current price of the underlying stock is $86.

a. Describe how you undertake an arbitrage strategy and find the arbitrage profits with steps of calculation, when the stock price at expiration is equal to $75.

b. Explain how the answer in (a) would be changed if the stock price at expiration is equal to $85.