Exercise 2.45. We established call-put parity formula holds for European call and put options:

C(0) P(0) = S(0) PV (K),

where P V (K) = K/R. With the choices S(0) = $10.50, K = $10.00, C(0) = $3.00, P (0) = $1.00 and R = 1.0043, show that the call-put parity formula is violated. Show how to create an arbitrage opportunity of at least $1000. You must not use any of your own money to fund this arbitrage opportunity.