A stock price is currently priced at $25. In 1 year its price will either be $26 or $30. The risk-free rate is 5% per annum with continuous compounding. (a) Suppose the stock pays a continuous dividend yield of 3% per annum. Construct an arbitrage opportunity. (b) Suppose the stock pays a continuous dividend yield of 1% per annum. In this case there is no arbitrage opportunity. So go ahead and price a 1-year at-the-money European call option on the stock.

Can someone do this out? I don't understand Arbitrage or Dividends