KAST's stock is currently selling for $50 a share. A one-year call option with a strike price of $45 on KAST's stock is priced at $8, and a one-year put option on the same stock with a strike price of $45 is selling for $3. The risk-free rate is 5%.

1. Explain why there is an arbitrage opportunity that you can exploit? (2 marks)
2. How could you exploit such an opportunity? (6 marks)
3. What would be your arbitrage profit? (2 marks)