Question
The spot price of a stock is $61.40 and it pays continuous dividends at a rate of 5%. Assume that all dividends are reinvested in
The spot price of a stock is $61.40 and it pays continuous dividends at a rate of 5%. Assume that all dividends are reinvested in the stock. You short 100 of these shares and borrow more stock to pay the dividends. After 3 months, the stock price is $60.79. The continuously compounded risk-free interest rate is 2%. What is the profit made in 6 months?
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Lessons In Corporate Finance
Authors: Paul Asquith, Lawrence A. Weiss
2nd Edition
1119537835, 978-1119537830
