Delta Inc. stock currently trades for $30, but you believe the share price will increase over the next six months. Six-month European call options on the stock have an exercise price of $35 and a premium of $.90. The annual risk free rate is 3%. You want to create a portfolio that mimics the payoff of writing a 6-month European put on the stock with an exercise price of $35. Which of the following steps must you do in order to achieve this payoff?

A. Buy 100 shares of the stock and pay 3000.

B. Buy a call option and pay $90 for the option premium.

C. Invest the present value of the exercise price ($3447.89) at the risk-free rate of return.

D. None of the above.

What should be the price of 6-month European put option on the stock with an exercise price of $35?

A. 5.83

B. 3.58

C. 5.38

D. 6.43

Suppose that 6-month European put options with an exercise price of $35 are selling for $6. Which of the following statements is true?

A. An arbitrage profit of approximately $17 per put can be made by selling puts in the market and creating a long position in synthetic put options.

B. An arbitrage profit of approximately $62 per put can be made by selling puts in the market and creating a long position in synthetic put options

C. An arbitrage profit of approximately $242 per put can be made by selling puts in the market and creating a long position in synthetic put options

D. An arbitrage profit of approximately $43 per put can be made by buying puts in the market and creating a short position in synthetic put options

E. None of the above