Suppose that a non-dividend paying stock is traded at a price S0=$100 today. The price of a one-year European call option, with exercise price X=$80 is C0=$25. Suppose that the risk-free rate is equal to zero. 55. (5 points) What should be the price P0 of a one-year European put option on the stock with the same exercise price and the same expiration date as the call? 56. (5 points) Suppose that the one-year European put option on the stock, with the same exercise price and the same expiration date as the call, trades at P0=$6. How would you setup an arbitrage? Describe your trades at time zero, as well as the payoffs on each of your portfolio positions after a year. Question (5-2) Consider the following option strategy with European call options, on the same nondividend paying stock and with the same expiration date. - Long 1 share of call with exercise price X1=100, and option price C1=15 (per share of option) - Short 2 shares of calls with exercise price X2=110, and option price C2=10 (per share of option) - Long 2 shares of calls with exercise price X3=130, and option price C3=5 (per share of option) - Short 1 share of call, with exercise price X4=140, and option price C4=3 (per share of option) 57. (10 points) Calculate the profits of the option strategy when (1) the stock price at expiration is: ST=110; and (2) the stock price at expiration is: ST=140