Suppose a non-dividend paying stock is trading at 150. If the risk-free lending rate is 7%, whereas

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Suppose a non-dividend paying stock is trading at ₹150. If the risk-free lending rate is 7%, whereas the borrowing rate is 9%:

a. What will be the arbitrage-free 6 month Futures price of the stock? (assume all rates are continuously compounded)?

b. What transactions will be undertaken to exploit the arbitrage, if the futures price is trading higher than your estimate obtained?

Related Book For answer-question

Bond Markets Analysis and Strategies

ISBN: 978-0133796773

9th edition

Authors: Frank J.Fabozzi

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Posted Date: Jun 23, 2023 12:55 AM

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Suppose a non-dividend paying stock is trading at 150. If the risk-free lending rate is 7%, whereas

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Bond Markets Analysis and Strategies

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