1. Consider a one-period case in which ABC stock is trading at S₀ = $50, u = 1.1 and d = 0.95, the period risk-free rate is 2.5%, and the stock is expected to go ex-dividend at the end of the period with a dividend worth $1.00 at the ex-dividend date.

a. Using the single-period BOPM, determine the equilibrium price of an ABC 100 European call option.

b. What is the equilibrium price of the call option if it was American and therefore could be exercised just before the expiration date?