QUESTION 2. [3 points] 1. Consider the case of European IBM call and put options that have exercise price of $110 and expire in two months. The price of the call is $3, and the price of the put is $10. Assume IBM is expected to pay no dividend in the next two months. Suppose also that the current price of IBM stock is $95. Portfolio A Portfolio B Sell IBM stock, sell a put, and buy a call ??? 2-1. Based on put-call parity, construct portfolio B equal to Portfolio A. Specify the strategy, maturity and face-value. Portfolio B = 2-2. What is the cost of Portfolio A & B today? What is the payoff of Portfolio A at the maturity? Bond-equivalent yield on a two-month T-bill is 10% nonannualized. Cost of Portfolio A today = Cost of Portfolio B today = Payoff of Portfolio A at the maturity = Payoff of Portfolio B at the maturity = this year and hold this position until next 2-3. A profitable arbitrage strategy is to long/buy (X) and short/sell year. Choose the correct strategies (Strategy A or Strategy B) in each blank (X) and (Y). a. (X):A, (Y):B b.(X):B, (Y):A c. (X) A, (Y):A d. (X): B, (Y):B e. no arbitrage opportunity exist