What is your risk-free arbitrage profit available

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Reference no: EM132054596

1. What is your risk-free arbitrage profit available if a six-month option pair has a strike price of $150, a spot price of $147, a call premium of $10, a put premium of $11, and the risk-free rate is 6%?

2. Using an 8 percent rate of return, Bill Black finds that the discounted value of the $10 dividend payment expected to be received each year over the next 5 years to be 9.25, 8.57, 7.94, 7.35, and 6.81, respectively. What is the value of the stock he is looking to purchase, calculated with the general dividend-valuation model?

A : $46.00

B : $41.08

C : $50.00

D : $39.92

2. Assume the following information:

1-year interest rate on U.S. dollars = 5.7%

1-year interest rate on Singapore dollars = 12.7%

Spot rate of Singapore dollar = 0.4 USD/SGD

If interest rate parity is in effect, what should be the 1 year forward rate on the SGD?

Reference no: EM132054596

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