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What transactions will be undertaken to exploit arbitrage

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Reference no: EM132753978

1. Suppose a non-dividend paying stock is trading at 150. If the risk-free lending rate is 7%, whereas the borrowing rate is 9%,

a. What will be the arbitrage-free 6 month Futures price of the stock? (assume all rates are continuously compounded)

b. What transactions will be undertaken to exploit the arbitrage, if the futures price is trading higher than your estimate obtained above?

Reference no: EM132753978

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