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The shares of Ω corporation are currently selling for 100. Corey notices that the price of a 1-year prepaid forward on Ω is 98.40. The continuously compounded risk-free rate is 4%, and Ω pays continuous dividends at the rate of 2%.
(a) What is the correct price for a 1-year prepaid forward on Ω?
(b) Please fully explain how Corey could generate a risk free profit because Corey sees an arbitrage opportunity.
(c) Calculate Corey's risk-free profit.
Calculate Platinum & Steel Products's return on equity (ROE) for the year.
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If the company has $5 million per day in collections and $3 million per day in disbursements, how many dollars will the cash management system free up?
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