You are not allowed to take notes or replicate this exam in…

You are not allowed to take notes or replicate this exam in part or in whole.  Doing so is an honor code violation.  If you have any questions or concerns about the exam, feel free to reach out to Doc. A or Zeel to set up an appointment to review your exam more thoroughly.

The price of a European put expiring in nine months with a s…

The price of a European put expiring in nine months with a strike price of $135 is $3. The underlying stock price is $142. A dividend of $0.50 is expected in two months and again in five months. The term structure of risk-free interest rates is: 2%, 2.05%, 2.08%, for two-, five-, and nine-month maturities, respectively. Which of the strategies below is an arbitrage if the corresponding call price is $4?