Consider European call and put options with the strike price of 90 and

maturity T=1 year written on stocks of ABC corporation. The options are currently

traded at prices C(90)= 15.5 and P(90)= 1.2, respectively. The prices of

European call and put options with the strike price of 100 and maturity T=1 year

written on the same stock are traded at prices C(100)= 7.8 and P(100)= 4,

respectively. The riskless interest rate is r=5% per year. Is there an arbitrage

opportunity? If so, how would you construct an arbitrage strategy? [Hint: use put-

call parity.]