Assume a stock has a value of $100. The stock is expected to pay a dividend of $2 per share at year-end. An at-the-money European-style put option with one-year maturity sells for $7. If the annual interest rate is 5%, what must be the price of a 1-year at-the-money European call option on the stock?

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A: The given problem relates to black Scholes model.

Q: Assume a stock has a value of $100. The stock is expected to pay a dividend of $2 per share at…

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A: The Black and Scholes Option Pricing Model is used to calculate the price of the European option.

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A: In this we have use the given formula and calculate the price of call option.

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A: The question is based on the concept of Derivatives

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A: The given problem relates to bLack Scholes model.