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A 9-month forward contract on a non-dividend-paying stock is entered into when the price of a stock is $40 and prevailing 9-month continuous compounding risk-free
A 9-month forward contract on a non-dividend-paying stock is entered into when the price of a stock is $40 and prevailing 9-month continuous compounding risk-free interest rate is 5%. How can an arbitrageur lock in a risk-free profit if the forward price of the stock is relatively higher by $4?
A 9-month forward contract on a non-dividend-paying stock is entered into when the price of a stock is $40 and prevailing 9-month continuous compounding risk-free interest rate is 5%. How can an arbitrageur lock in a risk-free profit if the forward price of the stock is relatively higher by $4?
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