a)What are lower and upper bounds for the price of a three-year European call option on a non-dividend-paying stock when the stock price is $50, the strike price is $48, and the risk-free interest rate is 5% per annum?

b)Suppose that the price of the call option in Question 1 is $6. Is there an arbitrage in the market? If so, find the arbitrage strategy and its resulting cash flows.

c)Consider a six-month European put option on a non-dividend-paying stock when the stock price is $37, the strike price is $40, and the risk-free interest rate is 5% per annum. The put price is $1.00. Is there an arbitrage opportunity? If so, find the arbitrage strategy and its resulting cash flows.