In the solution where did the 118p (borrowed cash) come from? If this is 120exp(-0.06/4)=118.21, then wouldn't repaying the cash in three months time be 120 since 118.21exp(0.06/4)=120, so our 'arbitrage' profit is the dividend itself?
The 118 is chosen because, together with the call option proceeds, it's just what's required to fund the two purchases, ie we're creating a zero-cost portfolio.
