What is net profit per share when futures contract expires

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Reference no: EM131552726

Consider a single-stock futures contract on Apple stock. Consider the following scenario: Annualized, continuously compounded risk-free interest rate for 2-month period: r = 4.09%. Annualized, continuously compounded risk-free interest rate for 4-month period: r = 6.71%. Current spot price of Apple stock: $562 per share. Dividend per share of $0.7 in 2 months. Contract expiration: T = 4 months. Futures price on Apple single-stock futures: $600 per share. An arbitrage opportunity exists. What is the net profit per share when the futures contract expires? Use a strategy that has zero net cash flows today and zero net cash flows in two months.

Reference no: EM131552726

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