Solved

BUG's Stock Price S Is $50 Today

Question 16

Multiple Choice

BUG's stock price S is $50 today.It pays a dividend of $0.25 after two months and $0.30 after five months.The continuously compounded interest rate is 4 percent per year.Transactions costs are $0.10 per stock traded,a $0.25 one-time fee for trading forward contracts,and no charges for trading bonds.If the six-month forward price is $51,the arbitrage profit that you can make today by trading one forward contract and other securities is:


A) 0
B) $0.18
C) $0.41
D) $0.53
E) None of these answers are correct.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q10: Assume that interest rates are constant.Given a

Q11: When the forward price is less than

Q12: Consider the "SINDY index" obtained by averaging

Q13: COMIND index is computed by averaging commodity

Q14: Alloyum costs $0.10 per month to store

Q15: Some index funds modify the index matching

Q17: Today's spot exchange rate S<sub>A</sub> is $1.30

Q18: BUG's stock price S is $50 today.It

Q19: A trader can borrow money at 6

Q20: Which of the following statements is INCORRECT?<br>A)