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On date t , a bank is quoting a price of $ 1 4 2 . 5 0 per share for a forward contract on
On date t a bank is quoting a price of $ per share for a forward contract on KimberlyClark Corporation stock. The forward contract expires in months. The date t price of KimberlyClark stock is $ per share and the interest rate is for continuous compounding KimberlyClark pays a $ per share quarterly
dividend. The dividend payments occur on dates t t t and so forth, where time is measured in years. Note that the spacing between dividends is years since the payments are quarterly.
Is this an arbitrage opportunity? If yes, what trades would you do to earn an arbitrage profit? Using a trade size of share, construct a cashflow table that shows the trades you
would use. What is the arbitrage profit per share?
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