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3.- The share price of ABC stock is $100 and in six months it will be either $85 or $120. Interest is compounded continuously at at rate of 6%. (a) Find the arbitrage-free price of a call option on one share of ABC stock expiring in six months with exercise price of $112 (10 pts) (b) Find the arbitrage-free price of a put option on one share of ABC stock expiring in six months with exercise price of $112 (3 pts) (c) Suppose Batman believes that the fair price of a call option is $7.50 and it is willing to buy the call option at that price. Create a portfolio (Draw a table) that creates an arbitrage. (10 pts) 3.- The share price of ABC stock is $100 and in six months it will be either $85 or $120. Interest is compounded continuously at at rate of 6%. (a) Find the arbitrage-free price of a call option on one share of ABC stock expiring in six months with exercise price of $112 (10 pts) (b) Find the arbitrage-free price of a put option on one share of ABC stock expiring in six months with exercise price of $112 (3 pts) (c) Suppose Batman believes that the fair price of a call option is $7.50 and it is willing to buy the call option at that price. Create a portfolio (Draw a table) that creates an arbitrage. (10 pts)