Question: 7. A call option on a stock with strike $75 expiring in 1 year costs $12. A put option on the same stock with strike

7. A call option on a stock with strike $75 expiring in 1 year costs $12. A put option on the same stock with strike $75 expiring in 1 year costs $7.50. Assuming the initial stock price is $80 and that the stock is scheduled to pay a single dividend in 6 months of $5, what is the risk-free rate of interest? (A) 5% (B) 6% (C) 7% (D) 8%

(E) 9%

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