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The S&P 500 spot level is 2,725. The 1-year at-the-money call on is selling at $200. The risk-free rate is 5% and the index pays

The S&P 500 spot level is 2,725. The 1-year at-the-money call on is selling at $200. The risk-free rate is 5% and the index pays a dividend yield of 4%. The S&P 500 options are European. (a) What is the theoretical price of the 1-year at-the-money put price? (2 marks) (b) The 1-year put is selling at $150 on the market, show how you can benefit from this arbitrage opportunity. Show all detail. (2 marks) (c) If the S&P 500 options were American, will there be an arbitrage opportunity?

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