particular stock does not pay dividends and is currently priced at $12. Suppose that the quoted futures price for delivery in 1 year is $12.45. The continuously compounded interest rate is 5%. The underlying does not pay dividends and there are no costs of trading. How could you make a riskless arbitrage profit? a. Today you buy futures, short sell the stock and invest the receipts from the short sale b. Today you buy futures, borrow money and purchase the stock. c. There is no way to make a risk-less profit in this scenario. d. Today you sell futures, borrow money and purchase the
particular stock does not pay dividends and is currently priced at $12. Suppose that the quoted futures price for delivery in 1 year is $12.45. The continuously compounded interest rate is 5%. The underlying does not pay dividends and there are no costs of trading. How could you make a riskless arbitrage profit? a. Today you buy futures, short sell the stock and invest the receipts from the short sale b. Today you buy futures, borrow money and purchase the stock. c. There is no way to make a risk-less profit in this scenario. d. Today you sell futures, borrow money and purchase the
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
A particular stock does not pay dividends and is currently priced at $12. Suppose that the quoted futures price for delivery in 1 year is $12.45. The continuously
a.
Today you buy futures, short sell the stock and invest the receipts from the short sale
b.
Today you buy futures, borrow money and purchase the stock.
c.
There is no way to make a risk-less profit in this scenario.
d.
Today you sell futures, borrow money and purchase the stock.
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