(b)A portfolio consists of a short-covered call (i.e., short stock + long call) and a protective put. Assume the naked options in these trading strategies have the same underlying asset, strike, and maturity. Explain why the portfolio is equivalent to a long straddle.

(e) There are two portfolios:

Portfolio A: one European call and a zero-coupon bond that provides payoff of $20 in one-year time.

Portfolio B: one European put and one non-dividend-paying share.

The call and put have the same strike price (i.e., $20) and time to maturity (i.e., 1 year). Today, the stock price is $22, the call price is $5, and the put price is $3. Interest rate is 10% per annual with continuous compounding. What are the present values of portfolio A and portfolio B? Is there an arbitrage opportunity? If yes, explain how to generate arbitrage profit and calculate the arbitrage profit. If no, explain why there is not such an opportunity.