Suppose that the risk-free interest rate is 10 per annum, Ask an Expert

Economics

Suppose that the risk-free interest rate is 10% per annum with continuous compounding and that the dividend yield on a stock index is 4% per annum. The index is standing at 400, and the futures price for a contract deliverable in four months is 405. What arbitrage opportunities does this create?

View complete question

Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M91236871

Have any Question?Write your Review or question?

Related Questions in Microeconomics

Question read the case the rise of the indian automobile

Question: Read the case "The Rise of the Indian Automobile Industry" on page 291 of Hill. Which of the following trade theories, absolute advantage, comparative advantage or national completive advantage, best explains t ...

Question how were the interests of southern states

Question: How were the interests of Southern states addressed by the Three-Fifths Compromise and the lack of export taxes? What were the major points of the "Virginia Plan" at the Constitutional Convention? How did the " ...

Question the prisoners dilemma provides insight into much

Question: The prisoners' dilemma provides insight into much more than price-fixing, as the next three questions indicate.53 a. People often complain that conversations at cocktail parties (where there is no music) are so ...

Question there is ongoing policy debate concerns whether to

Question: There is ongoing policy debate concerns whether to legalize the use of drugs, such as marijuana. Some researchers estimate that legalizing marijuana would cause its price to fall by as much as 95 percent. Propo ...

Question suppose you have 5000 in savings when the price

Question: Suppose you have $5,000 in savings when the price level index is at 100. (a) If inflation pushes the price level up by 10 percent, what will be the real value of your savings? (b) What is the real value of your ...

Question discuss the advantages and disadvantages of

Question: Discuss the advantages and disadvantages of maintaining multiple manufacturing sites as a hedge against exchange rate exposure. The response must be typed, single spaced, must be in times new roman font (size 1 ...

Question consider a drivers decision regarding how fast to

Question: Consider a driver's decision regarding how fast to drive. In particular, suppose that for this driver, the benefit (ins) of driving x miles per hour (mph) above the speed limit usually is B(x) = 63x - 2x^3. Als ...

Question a quasi-option value question imagine that the net

Question: A Quasi-option value question: Imagine that the net present value of a hydroelectric plant with a life of 75 years is $24 million and that the net present value of a thermal electric plant with a life of 40 yea ...

Question suppose two bonds apple inc and samsung

Question: Suppose two bonds (Apple Inc. and Samsung Electronics Co., Lid) are traded in the bond market and Ms. Wilson needs your advice on which one to buy. For the Apple bond, there is a probability of 60% (hat this bo ...

Question discuss the concepts of engineering projects and

Question: Discuss the concepts of engineering projects and their investment profile. How would you assess the economic feasibility of engineering projects in your organization? Give examples from your organization to sup ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Microeconomics Expert