Consider the 3-month call option that we discussed in class. Its exercise price is K = $95. Suppose that the current underlying stock price is $100, and the risk-free rate is 10% p.a., continuous compounding. Assume that we know that the stock price at maturity can take on only two values: $120 or $80.

Suppose that you observe that the current market price of this call option is $15. Is there an arbitrage opportunity? If so, how will you take advantage of it (please provide cash flows details)? If not, why not?