If the spot price of IBM today is $75 and the six-month forward price is $76.89, then
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If the spot price of IBM today is $75 and the six-month forward price is $76.89, then what is the implied repo rate assuming there are no dividends? Suppose the six-month borrowing rate in the money market is 4% p.a on a semiannual basis. Is there a repo arbitrage, and how would you construct a strategy to exploit it?
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The repo rate r is the implicit interest rate from an examination ...View the full answer
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