A stock is expected to pay a dividend of 0.75 per share in, Ask an Expert

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A stock is expected to pay a dividend of $0.75 per share in 3 months, 6, months, and 9 months. The stock price is $50 and the risk free rate of interest is 8% per annum with continuous compounding for all maturities. Assume this contract currently trades at $45. Is there an arbitrage opportunity? If so, what are the correct arbitrage strategy and the arbitrage profit? (show the cash flows from each transaction and the resulting net cash flows).

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M953047

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