You are a trader who trades both puts and calls on procter

Question

You are a trader who trades both puts and calls on Procter and Gamble. Information about current market conditions is displayed below.

Stock Price            Exercise Price      Expiration Date          Call Price         Put Price

88                                90                    1/12^th of a year               3.447                  5  

88                                95                    1/12^th of a year               2.131                  8

The annualized continuously-compounded risk-free rate is .06 (6%).

1.   Given the information above, are there any arbitrage opportunities?

2. If no, explain why. If yes, describe one set of trades you could make now to exploit the arbitrage opportunity. Show that this strategy generates an arbitrage profit.