A stock price (which pays no dividends) is $50 and the strike price of a two year European put option is $54. The risk-free rate is 3% (continuously compounded). What is a lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities exist if it is above the lower bound?

Mr. beautiful, an organization that sells weight training sets, has an ordering cost of $40 for the bb-1 set. (bb-1 stands for body beautiful number 1.) the carrying cost for bb-1 is $5 per set per year. to meet demand, mr. beautiful orders large quantities of bb-1 seven times a year. the stockout cost for bb-1 is estimated to be $50 per set. over the past several years, mr. beautiful has observed the following demand during the lead time for bb-1: demand during lead time probability40 0.150 0.260 0.270 0.280 0.290 0.1total 1.0the reorder point for bb-1 is 60 sets. what level of safety stock should be maintained for bb-1?