Question
The current price of Glencore stock is R50. The term structure of interest rates is flat at 10% with continuous compounding. (a) What is the
The current price of Glencore stock is R50. The term structure of interest rates is flat at 10% with continuous compounding.
(a) What is the six-month forward price (F) of the stock? [1 mark]
(b) The six-month call price at strike F is equal to R8. The six-month put price at strike F is equal to R7. Explain why there is an arbitrage opportunity given these prices.
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Elementary Algebra
Authors: Jerome E Kaufmann, Rosemary Karr, Karen L Schwitters, Marilyn Massey, R David Gustafson
10th Edition
1305161769, 9781305161764
