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Consider an eight-month futures contract on stock that is currently trading for $78. The risk-free rate of interest continuously compounded is 5%. What is the theoretically true futures price if:

a) No dividends are expected for the duration of the futures contract

b) Dividend payments of $0.55 are expected after three months and after five months.

c) The stock pays an average dividend yield of 3% per year

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92800214

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