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Relationship between put and call prices

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Suppose European put and calls exist on the same stock, each with X = $150 and the same expiration date. The current stock price is $150. The current price of the call is $13.50 and the price of put option is $12, and a risk-free investment over the life of the options will yield 2%.

-a. Based on the put-call parity, what is the theoretical relationship between put and call prices

-b. Is Put-Call Parity violated

-c. If the put-call parity is violated, devise a strategy that will earn risk-free arbitrage profits (outline the strategy, the cash flows and the profits).

Reference no: EM133070813

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