Consider a European put option and a European call option on a $40 non-dividend-paying stock. Both options have 6 months remaining and both have a $35 strike price. The risk-free interest rate is 5% CCAR.

a. The market price of the put is $6. Calculate the no-arb price for the call.

b. Which of the options is in-the-money? Which is out-of-the-money? Under the no-arb condition, is the call or the put more expensive?

c. Describe the likely actions of an arbitrageur now and at time T if the quoted market price of the call is $9.

d. Now as assume the quoted market price of the call is $9.00. Calculate the no-arb price of the put.

e. Describe the likely actions of an arbitrageur now and at time T if the quoted market price of the put is $6.