Suppose you have the following information concerning a particular options. Stock price, S = RM 21 Exercise price, K = RM 20 Interest rate, r = 0.08 Maturity, T = 180 days = 0.5 Standard deviation, = 0.5 

1. a. What is correct of the call options using Black-Scholes model?

b. Compute the put options price using Black-Scholes model. 

2. Suppose a European put options has a price higher than that dictated by the put call parity. 

a. Outline the appropriate arbitrage strategy and graphically prove that the arbitrage is riskless. 

b. Name the options/stock strategy used to proof the put-call parity. 

c. What would be the extent of your profit in (a) depend on?