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Suppose the price of a stock is $28, the risk-free interest rate is 10%, and the price of a European call option on the stock

Suppose the price of a stock is $28, the risk-free interest rate is 10%, and the price of a European call option on the stock with a one-year expiration and a strike price of $26 is $5.

a.Assume that the stock does not pay dividends. What are the arbitrage possibilities for the stock when p = 3.25?

b.Assume that the stock does not pay dividends. What are the arbitrage possibilities for the stock when p = 0.50?

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