Consider a four-month European call option on a dividend-paying stock. The stock price is $75,

the strike price is $70, and a dividend of $1.50 is expected in three months. The risk-free interest rate is 8% per annum for all maturities.

a. What is the lower bound for the price of this call?

b. Assume that the call is currently selling for $3. Describe in detail with which strategy you can gain an arbitrage profit and how much this profit will be.