Use the following information to answer Q10-Q14.

Suppose you are allowed to trade the following financial instruments (assume that each option contract covers one share of stock A, e.g., a call option allows you to buy one share of A at the strike price if you want):

1. Stock A which is traded at $100 now
2. The 1-year to maturity European call option on stock A with a strike price of $80;
3. The 1-year to maturity European put option on stock A with a strike price of $80;
4. The 1-year to maturity European call option on stock A with a strike price of $100;
5. The 1-year to maturity European put option on stock A with a strike price of $100;
6. The 1-year to maturity European call option on stock A with a strike price of $120;
7. The 1-year to maturity European put option on stock A with a strike price of $120;
8. The 1-year zero-coupon bond with a YTM of 5%;

a) If you expect no big news on stock A's earnings announcement next week, which option portfolio below should you trade?

b) Suppose your friend Tom holds a portfolio as follows: buy one contract of [3], buy two contracts of [5], sell three contracts of [7], and long one share of stock A. What is the slope of portfolio payoff if stock A's price goes above $120?

c)What is the payoff of Tom's portfolio if the price of stock A drops to $80 on maturity?

d)What is the minimum payoff of Tom's portfolio?

e)Suppose the call option [4] has a premium of $5, the put option [5] has a premium of $10. Is there any arbitrage opportunity and if so, how should you trade?