To answer this question, we need to look at the put-call parity, which can be expressed as:
Value of call - Value of put = Spot price - Exercise price discounted to the present
or, Value of call - Value of put = Stock - Bond with a future value equal to exercise price
Therefore, a long call and a short put is equivalent to a long stock position and a short bond.
Choice 'a' is therefore the correct answer. (Alternatively, we could also have constructed a graph of the payoff profiles to arrive at the same answer).
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