Forward contract on blackrock

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Reference no: EM132543970

BlackRock, Inc. is an American global investment management corporation based in New York City. Founded in 1988, initially as a risk management and fixed income institutional asset manager, BlackRock is today the world's largest asset manager with $7 trillion in assets.

Suppose Blackrock stock (ticker: BLK) is trading at $400 and pays a discrete dividend of $3 to its shareholders once per quarter, the first dividend of $3 to be paid in 0.25 years from today, the second dividend of $3 to be paid in 0.5 years from today, the third dividend of $3 to be paid in 0.75 years from today, and the fourth dividend of $3 to be paid in 1 year from today. The continuously compounded annual risk-free interest rate that you can lend or borrow at is 8%. In this problem, you are to use continuous compounding of interest in all computations.

Suppose the market prices for a normal (not prepaid) 1-year forward contract on Blackrock are as follows:

-bid price for BLK forward contract: $520.95

-ask price for BLK forward contract: $530.95What is the exact arbitrage profit, rounded to the nearest integer dollar?

Reference no: EM132543970

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