Explanation

To solve for the implied dividend yield, we use the put-call parity formula for European options with continuous dividends:

$C - P = S_0 e^{-qT} - K e^{-rT}$

Where:

• $C$ = Call price = USD 10
• $P$ = Put price = USD 15
• $S_0$ = Initial stock price = USD 85
• $K$ = Strike price = USD 90
• $r$ = Risk-free rate = 5% = 0.05
• $q$ = Dividend yield (what we're solving for)
• $T$ = Time to maturity = 5 years

Substituting the values:

$10 - 15 = 85 e^{-q \times 5} - 90 e^{-0.05 \times 5}$ $-5 = 85 e^{-5q} - 90 e^{-0.25}$ $-5 = 85 e^{-5q} - 90 \times 0.7788$ $-5 = 85 e^{-5q} - 70.092$ $85 e^{-5q} = 65.092$ $e^{-5q} = \frac{65.092}{85} = 0.7658$ $-5q = \ln(0.7658) = -0.2667$ $q = \frac{0.2667}{5} = 0.05334 = 5.334\%$

However, this gives us 5.34%, which corresponds to option C. But let me double-check the calculation:

$e^{-0.25} = 0.77880078$ $90 \times 0.77880078 = 70.09207$ $85 e^{-5q} = 70.09207 - 5 = 65.09207$ $e^{-5q} = 65.09207 / 85 = 0.765789$ $-5q = \ln(0.765789) = -0.26678$ $q = 0.26678 / 5 = 0.053356 = 5.3356\%$

This confirms that the calculated dividend yield is approximately 5.34%, which matches option C.

Therefore, the correct answer is C: 5.34%