Question 1 You observe the shares on ABC trading at $61.00. Call and put options on ABC shares are also trading. Each option contract is written over 1000 shares. A three month call option at a strike price of $60.00 is trading at $3.00 while the put option is trading at $1.08. Show that there is an arbitrage profit to be made, and give explicit details of how the mispricing will be arbitraged and what the profit (in dollars) of your arbitrage strategy will be. You must show the exact strategy and present the cashflows from the strategy in a table. Assume that the risk-free rate is 4.5% p.a. (continuously compounded). (8 marks)