What is the implied risk-free rate

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The prices of European call and put options on a non-dividend-paying stock with 12 months to maturity, a strike price of $120, and an expiration date in 12 months are $20 and $5, respectively. The current stock price is $130. Give your answers as percentages with 2 decimal places, e.g 1.23%.

a) What is the implied risk-free rate?

b) Repeat (a) assuming the the stock pays a dividend of $2 immediately prior to the expiration date.

c) Repeat (a) assuming the the stock pays a dividend of $2 in 6-months.

Reference no: EM132796048

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