EDEXCEL

Theres a European 1-year call option with strike K = $1000 costs c=$200. and a European 1 year put option on same stock has same strike. costs p=$100.

Underlying stock costs S= $700. The continuous compound risk-free rate is r=6% and divided yield q=0%.

Consider the strategy of buying the stock, selling the call, and buying the put.

Q1: What is the rate of return on this position held until the expiration of both call and put options? Does this mean this is a riskless strategy as premium is less than intrinsic value and therefore trader will pay riskless rate of 6%?

Q2: identify the arbitrage.