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Given the following information concerning European options on a non-dividend paying stock: Call price $4.00 Put price $3.10 Strike price $30.00 Time to expiry 3

Given the following information concerningEuropeanoptions on a non-dividend paying stock:

Call price

$4.00

Put price

$3.10

Strike price

$30.00

Time to expiry

3 months

Stock price

$31.00

Risk free rate

6% p.a. (continuously compounded)

Show that put-call parity is violated.Use the information above to indicate the action that is required to earn an arbitrage profit.Based on one stock, calculate the arbitrage profit available.

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