A stock price is $50 today. It pays dividend of $1 after two months and $1.05 after five months. The continuously compounded interest rate is 4% per year. Transaction costs are $0.10 per stock traded, a $0.25 one-time fee for trading forward contracts, and no costs for trading bonds. If the six-month forward price is $51, demonstrate how to make arbitrage profits or explain why you cannot.

Answer rating: 100% (QA)

If i buy stock todayinclude transaction costs of 10 for 501... View the full answer