Suppose a stock is currently trading at 100 and the futures price for a contract deliverable...
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Suppose a stock is currently trading at 100€ and the futures price for a contract deliverable in 6 months is 102. The interest rate is 10% (continuously compounded) and a dividend of 2€ is expected to be paid in 3 months. a. What arbitrage opportunities does this create? (assume no margin requirements) b. Explain carefully how you can realize an arbitrage profit? Suppose a stock is currently trading at 100€ and the futures price for a contract deliverable in 6 months is 102. The interest rate is 10% (continuously compounded) and a dividend of 2€ is expected to be paid in 3 months. a. What arbitrage opportunities does this create? (assume no margin requirements) b. Explain carefully how you can realize an arbitrage profit?
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To analyze the arbitrage opportunities in this scenario we need to compare the current stock price t... View the full answer
Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
Posted Date:
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