The S&R index spot price is 1100, the risk-free rate is 5%, and the dividend yield on
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The 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 6-month forward price of 1115. What arbitrage would you undertake?
DividendA dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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We need to find the fair value of the forward price first We plug the continuously compounded intere...View the full answer
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