1. The stock price is $100. There are two European options that expire in 1 year with an exercise price of $110. The call option premium is $3 and the put option premium is $12.5. The risk free rate is 6% compounded annually. Is Put-Call Parity violated? If so, you must show the appropriate strategy to capture that profit. You must show a full arbitrage table with payoffs today and in the future. Round to 4 decimal

SHOW YOUR WORK TO GET CREDIT FOR ANY CALCULATIONS

I want an answer for number 1. I have added picture of the example problem below in a way I want my answer to be using those formulas from the picture.

Because that's how the professor wants his answers to be and make sure to add a table looking like from the example problem.

Arbitrage Strategy to S = x Sp>X Long Call - 3.50 St-X Soad Example: Suppose the current stock price is $100, the exercise price is $100, the annually compounded interest rate is 5%, the stock pays a $1 dividend in the next instant, and the quoted call price is $3.50 for a one year option. Identify the appropriate arbitrage opportunity and show the appropriate arbitrage strategy short stuck +C100-13 -S .be Lead with face value of 8 - 100(1.0,55' = -95.24 sine dividents exist +X +X - Check violation of lower bound Net +,26 X-6 - 0 Lower Bound positive Celso,t, x) = Max [o, so D-X (1+r)-7] > max [9, 100-1 -100 (17,05)") =3.76 with No downside Need positive Cf today risk in the future, 3,76 3.50 thus arbitrage opportunity Notice if St=120 quoted (buy call) price Long call +(120-100) tao - Lo :-130 short stuck Lend with +10. +/ou face value of X O a exactly enough to fund purchase of stack Need of from short sale Arbitrage Strategy to S = x Sp>X Long Call - 3.50 St-X Soad Example: Suppose the current stock price is $100, the exercise price is $100, the annually compounded interest rate is 5%, the stock pays a $1 dividend in the next instant, and the quoted call price is $3.50 for a one year option. Identify the appropriate arbitrage opportunity and show the appropriate arbitrage strategy short stuck +C100-13 -S .be Lead with face value of 8 - 100(1.0,55' = -95.24 sine dividents exist +X +X - Check violation of lower bound Net +,26 X-6 - 0 Lower Bound positive Celso,t, x) = Max [o, so D-X (1+r)-7] > max [9, 100-1 -100 (17,05)") =3.76 with No downside Need positive Cf today risk in the future, 3,76 3.50 thus arbitrage opportunity Notice if St=120 quoted (buy call) price Long call +(120-100) tao - Lo :-130 short stuck Lend with +10. +/ou face value of X O a exactly enough to fund purchase of stack Need of from short sale