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Thanks a lot guys! It makes much more sense now to understand options arbitrage. I just needed to know which reasoning direction was the correct one to find out arbitrage. @Kevin Schmit Indeed, still need to be more comfortable with Ln calculations. Thanks a lot though!

It's an example from a text book, trying to understand it!

Hey guys! I've got a question regarding option arbitrage: Suppose the continuously compounded risk-free rate is 5% for all maturities. The current level of the index is 1000. Dividends are assumed to be re-invested 1) A European call option on this index with strike price equal to 1000 and...