A stock currently stands at $128 per share. The continuously compounded risk-free rate is 3.5% per year.
Fantastic news! We've Found the answer you've been seeking!
Question:
A stock currently stands at $128 per share. The continuously compounded risk-free rate is 3.5% per year. The stock does not pay any dividends.
a. What should be the futures price for a 7-month contract?
b. Suppose the current futures price is $129.50. Is there an arbitrage opportunity to exploit? Explain all steps in detail.
Related Book For
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
Posted Date: