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Suppose the call price is $14.2 and the put price is $9.3 for stock options, where the exercise price is $100, the risk-free interest rate

  1. Suppose the call price is $14.2 and the put price is $9.3 for stock options, where the exercise price is $100, the risk-free interest rate is 5% (continuously compounded), and the time to expiration is one year.
    1. Explain how you would create a synthetic stock position and identify the cost.
    2. Suppose you observe a $100 stock price; identify any arbitrage opportunities.

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