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2. Arbitrage Using Options on Dividend-Paying Stock A stock currently sells for $90 and will pay a $5-dividend in year 1. The 2-year European call

2. Arbitrage Using Options on Dividend-Paying Stock

A stock currently sells for $90 and will pay a $5-dividend in year 1. The 2-year European call option on this stock has a strike price of $80. The call price is $9. The risk-free rate is 4% per annum. Is there an arbitrage? If so, find the arbitrage strategy and its cash flows.

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