Consider a single-stock futures contract on exxon-mobil, Ask an Expert

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Consider a single-stock futures contract on Exxon-Mobil stock. Consider the following scenario:

Annualized, continuously compounded risk-free interest rate for 3-month period: r = 3.79%.

Annualized, continuously compounded risk-free interest rate for 5-month period: r = 5.31%.

Current spot price of Exxon Mobil stock: $158 per share.

Dividend per share of $0.69 in 3 months.

Contract expiration: T = 5 months.

Futures price on Exxon Mobil single-stock futures: $150 per share.

An arbitrage opportunity exists. What is the net profit per share when the futures contract expires? Use a strategy that has zero net cash flows today.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92363483

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