Question
Financial assets usually cost nothing to store, however, the very purpose of e.g. shares to give dividends. If you lend a share, the dividend accrues
Financial assets usually cost nothing to store, however, the very purpose of e.g. shares to give dividends. If you lend a share, the dividend accrues to the person who holds the share at the time of the dividend, and of course the owner of the share wants to be compensated for this. Assume that shares in the company AB cost SEK 390.00 on the spot market today and that the share is also traded on the futures in 1 year. The forward price is calculated according to an annual interest rate of 2.60%. Furthermore, the company plans a dividend of SEK 20.28 per share in 1 year's time, just before the futures contract comes into force. What should the futures price of the stock be one year from now if there is no opportunity for arbitrage? The cost of the actual storage when borrowing the share is equal to zero, but the owner is compensated for his non-delivery of shares. Round your answer to two decimal places, is your answer e.g. 7.2623 answer in that case 7.26.
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