The price of a non-dividend-paying stock is $100 and the continuously compounded risk-free rate is 5%. A 1-year European call option with a strike price of $100 × €0.05x1 -$105.127 has a premium of $11.924. A 1 year European call option with a strike price of $100 x 20.05x15 - $107.788 has a premium of $11.50. Demonstrate an arbitrage.

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Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.