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5. SLJnower company's share price is currently trading at $20. The volatility of the stock return is at 25%. Risk-free rate is 1%. There are following options written on it: [8 marks] Strike Price Bid Ask l Contract Size 3-month Call $22 0.33 0.35 | 100 stocks 3-month Put $22 2.20 2.50 l 100 stocks What are the intrinsic value of the call and put price based on the Black-Scholes Model? [1 mark] What are the time value of the call and put? [1 mark] Is there any arbitrage opportunity given the prices of the call and put? Why or why not? [3 marks] Given that a new 3-month call has just been introduced by one broker. The price of the call is given In the following table. Is there any arbitrage opportunity now? Show your detailed workings if there is an arbitrage opportunity to be explored. [3 marks] Strike Price Bid Ask Contract Size 3-month Call $20 0.80 0.92 100 stocks |