Question
The current stock price is $50, and the continuously compounded interest rate is 12% per annum. The stock is going to provide a dividend of
The current stock price is $50, and the continuously compounded interest rate is 12% per annum. The stock is going to provide a dividend of $2.50 after 9 months. If the 1-year forward price of this stock is $56, there are arbitrage opportunities. What is the arbitrage profit that can be made today by trading in one forward contract ?
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Financial Management for Public, Health and Not-for-Profit Organizations
Authors: Steven A. Finkler, Daniel L. Smith, Thad D. Calabrese, Robert M. Purtell
5th edition
1506326846, 9781506326863, 1506326862, 978-1506326849
