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What is the best trade for chandrika to make

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Reference no: EM132836900

Problem 1: TFS is trading at $50 / share. It has no dividend and the current cc interest rate is 4%. What is the 2 month forward price?

a. 52.00000
b. 50.33333
c. 50.33445
d. 50.00000

Problem 2: TFS is still trading at $50 / share and the cc interest rate r = 4%. Chandrika believes that TFS will (for the first time ever!) pay a dividend of $1 exactly 1 month (1/12 of a year) from now. When she calculates the 2 month forward price for TFS, what does she get?

a. 49.32776
b. 49.16361
c. 49.33111
d. 49.33000

Problem 2: What is the best trade for Chandrika to make that will pay her if view about the dividend is correct?

a. Buy TFS and sell a 2 month forward contract struck at F.
b. Go short a 2 month forward contract struck at F.
c. Short TFS stock and go long a 2 month forward contract struck at F.
d. Go long a 2 month forward contract struck at F.

Reference no: EM132836900

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