The current price of certain share on the market is 15,50EUR. We assume that in three months
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Question:
The current price of certain share on the market is 15,50EUR. We assume that in three months this share will pay a dividend in the amount of 0,69 EUR per share. We also assume that there is fee (cost of keeping this share) for investor at the level of 3% yearly (continuous capitalisation). The term structure of interest rate is flat : 6% for any term.
a) Please calculate the theoretical price of 6 month future contract for this share.
b) If the current market price of a future contract is equal to the current market price of share,please check if the arbitrage is possible.If yes indicate the position that investor should take in arbitrage strategy,if no,explain why?
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