Assume the Black-Scholes framework. Consider a 1-year European contingent claim on a stock. You are given:

(i) The time-0 stock price is 45.

(ii) The stock’s volatility is 25%.

(iii) The stock pays dividends continuously at a rate proportional to its price. The dividend yield is 3%.

(iv) The continuously compounded risk-free interest rate is 7%.

(v) The time-1 payoff of the contingent claim is as follows:

Calculate the time-0 contingent-claim elasticity.

(A) 0.24

(B) 0.29

(C) 0.34

(D) 0.39

(E) 0.44

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payoff 42 42 S(1)