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A trader enters a long 6 - month futures contract on a stock that will be paying a dividend of $ 4 in 3 -

A trader enters a long 6-month futures contract on a stock that will be paying a dividend of $4
in 3-months' time. The stock price at t=0 is $80 and the simple interest rate is 6% per annum.
What is the futures price?
a.79.54
b.80.21
c.78.36
d.78.90
e. None of the above
If the quoted market price of the futures is Fg=$79 as opposed to the one you calculated in the
previous question, (i) how much would you need to borrow at t=0 to construct an arbitrage
strategy to exploit the mispricing and (ii) what would your profit be at maturity?
a.(i) $80.00,(ii) $0.66
b.(i) $80.00,(ii) $0.67
c.(i) $76.06,(ii) $0.64
d.(i) $3.94,(ii) $0.67
e. None of the above
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