Stock ABC is trading spot at a price of 40. The one-year forward quote for the stock
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Stock ABC is trading spot at a price of 40. The one-year forward quote for the stock is also 40. If the one-year interest rate is 4% and the borrowing cost for the stock is 2%, show how to construct a riskless arbitrage in this stock.
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First we note that the correct forward price should be Fcorrect40e004002 40...View the full answer
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