Detailed Answer
Answer (A) is correct. The value of one share of stock today is the price of the stock at the end of the year plus the dividend received, discounted back 1 year by the required rate of return. Thus, the value of the stock at the end of the year is $46.25 ($45 plus the $1.25 dividend). This must be discounted back to today to equal $42.05 ($46.25 ÷ 1.10).