Consider a single-stock forward contract on apple stock, Ask an Expert

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Consider a single-stock forward contract on Apple stock. Suppose that the contract expires before Apple’s next cash dividend. Consider the following scenario:

Risk-free interest rate: r = 1.25% per year, continuously compounded.

Current spot price of Apple stock: $111.79 per share.

Contract expiration: T = 2 months.

Forward price on Apple single-stock forward: $115 per share.

Does an arbitrage opportunity exist? If so, what is the net profit per share when the forward contract expires? Use a strategy that has zero net cash flows today.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92071862

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