Suppose European put and calls exist on the same stock, each with X = $150 and the same expiration date. The current stock price is $150. The current price of the call is $13.50 and the price of put option is $12, and a risk-free investment over the life of the options will yield 2%.

1. Based on the put-call parity, what is the theoretical relationship between put and call prices
2. b. Is Put-Call Parity violated
3. c. If the put-call parity is violated, devise a strategy that will earn risk-free arbitrage profits (outline the strategy, the cash flows and the profits).