What is the arbitrage profit per share

Assignment Help Portfolio Management

Reference no: EM133098466

Question: Suppose that the risk-free interest rate is 8% per annum with continuous compounding. The dividend yield on a stock is 3.5% per annum. The stock currently is selling at $255.17 and the futures price for a contract deliverable in five months is $270.

a. Is there an arbitrage opportunity? [x](sample answer: yes; or no)

b. If there is an arbitrage opportunity, then will you long futures or short futures? [y](sample answer: Long; or Short)

c. What is the arbitrage profit per share if there is an arbitrage opportunity in today's dollar (PV of the profit) ignoring the transaction fee? [z](sample answer: $1.25)

Reference no: EM133098466

Questions Cloud

Identify at least one major development : Identify at least one major development from each of the following perspectives: financial, legal, ethical, regulatory, and social (e.g., consumer demand).

Create communication strategy : For this assignment, you will create a communication strategy that fosters change and innovation in an organization.

What would partner a capital balance be after transaction : Assume the above recognized assets are understated by $25,000. What would Partner A capital balance be after the transaction

Find information about multinational company : Find information about a multinational company that is headquartered in the United States. Include the following components in your case study.

What is the arbitrage profit per share : What is the arbitrage profit per share if there is an arbitrage opportunity in today's dollar (PV of the profit) ignoring the transaction fee

Design Assessment Modelling Report : Design Assessment - To improve its services, the senior management of the library has considered a computerized library management system

What is the monthly payment to the dealer : You are considering buying a new guitar worth $10,000. The dealer offers you a financing package. What is the monthly payment to the dealer

Comparing ratio to industry average important : How does this company's ratio compare to those of its competitors? Why is comparing this ratio to the industry average important?

Calculates and outputs the points for each round : Design, develop, test and evaluate a program and Calculates and outputs the points for each round and each player's total score

User Account

All Pages