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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Cost Management Measuring Monitoring And Motivating Performance
Authors: Leslie G. Eldenburg, Susan K. Wolcott
2nd Edition
978-0-470-7694, 0470769424, 978-0470769423
