Use the following information to answer the next three questions.

Q13: Davis Corp. common stock currently trades for $70, but you believe the company's stock will appreciate due to strong sales in the next six months. 6 month European put options on the stock have an exercise price of $65 and a premium of 75. The annual risk free rate is 3%. You want to create a portfolio that provides the same return as a 6 month european call on Davis Corp. that has a strike price of $65. Which of the following steps must be done to achieve the payoff you desire?

A. Sell a put option and receive $75 for the option premium.

B. Sell the stock and receive $7000.

C.Borrow $6404.64 at the risk free rate today.

D. Cannot be determined.

Q14: What should be the price of a 3 month European call option on Davis stock that carries a $65 strike price? Round intermediate steps to four decimals and your final answer to two decimals. Do not use the dollar sign when entering your response.

Q15: Suppose that 6 month European call options with an exercise price of $65 are selling for $6.85. Which of the following statements is true?

A. An arbitrage profit of approximately $15 per call can be made by selling calls in the market and creating a long position in synthetic call options.

B. An arbitrage profit of approximately $15 per call can be made by purchasing calls in the market and creating a short position in synthetic call options.

C.The market is in equilibrium.

D.None of the above