Repeat the previous problem, assuming that the dividend yield is 1.5%.
Answer to relevant QuestionsThe S&R index spot price is 1100, the risk-free rate is 5%, and the dividend yield on the index is 0. a. Suppose you observe a 6-month forward price of 1135. What arbitrage would you undertake? b. Suppose you observe a ...Consider production ratios of 2:1:1, 3:2:1, and 5:3:2 for oil, gasoline, and heating oil. Assume that other costs are the same per gallon of processed oil. a. Which ratio maximizes the per-gallon profit if oil costs ...a. Suppose that you want to borrow a widget beginning in December of Year 0 and ending in March of Year 1. What payment will be required to make the transaction fair to both parties? b. Suppose that you want to borrow a ...As in the previous problem, consider holding a 3-year bond for 2 years. Nowsuppose that interest rates can change, but that at time 0 the rates in Table 7.1 prevail. What transactions could you undertake using forward rate ...An 8-year bond with 6% annual coupons and a 5.004% yield sells for $106.44 with a Macaulay duration of 6.631864. A 9-year bond has 7% annual coupons with a 5.252% yield and sells for $112.29 with a Macaulay duration of ...
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