Suppose stock A is priced at $30/share and the company will pay a dividend of $0.30/share after two months. An investor purchases 100 shares of A and invests all dividends received at a continuously compounded risk-free rate of 5%. After 3 months the stock is sold when the price is $35.40/share. Calculate the 3-month profit.

Advanced Engineering Mathematics
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Suppose stock A is priced at $30/share and the company will
pay a dividend of $0.30/share after two months. An investor
purchases 100 shares of A and invests all dividends received at
a continuously compounded risk-free rate of 5%. After 3
months the stock is sold when the price is $35.40/share.
Calculate the 3-month profit.
Transcribed Image Text:Suppose stock A is priced at $30/share and the company will pay a dividend of $0.30/share after two months. An investor purchases 100 shares of A and invests all dividends received at a continuously compounded risk-free rate of 5%. After 3 months the stock is sold when the price is $35.40/share. Calculate the 3-month profit.
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