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Suppose the current price of a stock with continuous dividend yield 2% per annum is $10 per share. Suppose also the continuously compounded risk-free interest

Suppose the current price of a stock with continuous dividend yield 2% per annum is $10 per share. Suppose also the continuously compounded risk-free interest rate is 5% per annum. Determine whether there is an arbitrage opportunity for the following situation. Explain why.

The price of a European call option with strike price $10 and maturity 1 year is $0.42, and the price of a European put option with the same strike price and maturity is $0.10.

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