In this question we compare the options on specic stocks and the options on the index. The current IBM share price is $100 and the Intel share price is $5 0. The index is a simple average of the prices of the two stocks, which currently stands at $75. Consider two alternatives. i) Two call options (European) on the index with an exercise price of $75. ii) One call option on IBM with an exercise price of $100, and one call option on Intel stock with an exercise price of $50. a) Assuming no arbitrage can we say which alternative should cost more? Explain