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Suppose the current price on a stock is $30, the stock has an annual dividend yield of 3%. The risk-free rate is 5%. If a
Suppose the current price on a stock is $30, the stock has an annual dividend yield of 3%. The risk-free rate is 5%. If a futures contract on this stock is available with a 6-month maturity, what should its price be? If the future price in the market is $30.25, how can you structure an arbitrage position? And how much would be your arbitrage profit?
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