Consider a stock of ABC Company. It has an expected return of 10% per year, and it has an estimated return volatility of 20% per year. The risk-free rate is 6% per year (CCR). ABC stock has a current price of $100 and has declared dividends of $13 to be paid at the end of each year.

a) Find the value of a European call option expiring in 2 years with a strike price of $110 using the Black-Scholes-Merton model.

b) Construct a tracking portfolio (at the current time t = 0) using ABC stock and the risk-free asset to replicate the above call option based on the BSM model.