Question
Given the following definitions and values in percent per annum continuous compounding: US risk-free rate (r = 4%); foreign risk-free rate (rf = 2%); dividend
Given the following definitions and values in percent per annum continuous compounding: US risk-free rate (r = 4%); foreign risk-free rate (rf = 2%); dividend yield on a stock index (d = 1%); storage cost of a commodity (u = 0.2%). What is the cost of carry [percent per annum value] for (i) a non-dividend-paying stock, (ii) the stock index, (iii) the commodity with storage costs, and (iv) the foreign currency?
a. i) 4%, ii) 3%, iii) 3.8%, and iv) 2%.
b. i) 2%, ii) 3%, iii) 4.2%, and iv) 2%.
c. i) 4%, ii) 5%, iii) 4.2%, and iv) 2%.
d. i) 4%, ii) 3%, iii) 4.2%, and iv) 2%.
e. None of the others
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