The futures price for contract deliverable in four months

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Reference no: EM131968209

1. Suppose that the risk-free interest rate is 10% per annum with continuous com pounding and that the dividend yield yield on a stock is 4% per annum. The index is currently 401 and the futures price for a contract deliverable in four months is 405. What arbitrage opportunities does it create?

2. A stock with the spot price $42 pays dividends continuously at a rate of 3%. e four month put and call options wi on the asset are tra a1Id e risk-free rate is constant and equal to 5% for whether the Put-Call parity relationship is or is not satisfied. If there is an arbitrage opportunity, how do you take advantage of it?

Reference no: EM131968209

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