Assume the Black-Scholes framework. Consider a 3-month European contingent claim on a stock.

You are given:

(i) The stock is currently selling for 50.

(ii) The stock will pay a single dividend of 1.5 in two months.

(iii) Var[ln F^P_t,0.25(S)] = 0.09t, for 0 ≤ t ≤ 0.25.

(iv) The continuously compounded risk-free interest rate is 10%.

(v) The 3-month payoff of the contingent claim is as follows:

Calculate the profit on the contingent claim if the 3-month stock price is 45.

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Payoff 0 -50 50 3-month stock price