The Price of Chileme Stock is Rs. 1200 currently. A European call option on this stock has exercise price of Rs. 1200 and selling for Rs. 100. A European put option on this stock has also Rs. 1200 exercise price and selling for Rs. 45. Both options expire in 6 months.

a. Examine whether these prices confirm the put call parity if not? (3 Marks)

b. Suggest the strategy if the risk free rate is 5% per annum? (7 Marks)