Suppose the current stock price is $110, the exercise price is $105, the annually compounded interest rate is 4%, and the quoted call price is $6.50 for a half year option. Identify the appropriate arbitrage opportunity and show the appropriate arbitrage strategy (MAKE A TABLE). Round to 4 decimals SHOW YOUR WORK FOR ANY CALCULATIONS

Explain the effect of time to expiration on call and put premiums. Explain 3 different ways the time value of an option can be zero.

Explain how to create a short synthetic put. You must prove your answer.