1. Hunter Company had 100,000 shares of common stock issued and outstanding at December 31, year 1. On July 1, year 2, Hunter issued a 10% stock dividend. Unexpired stock options to purchase 20,000 shares at $20 (adjusted for stock dividend) were outstanding at the beginning and end of year 2. The average price of Hunters stock was $25 per share. Net income for year 2 was $550,000, what is the diluted EPS?

1. $5.24
2. $5.05
3. $5.00
4. $4.82