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You are given that the current price of Apple stock at the New York Stock Exchange is 500 per share. The nine-month forward price is 552 per share. Apple will pay a dividend of 25 in a year. The risk-free rate is 4% per annum continuously compounded. Determine if there is an arbitrage opportunity based on the prices given, and if there is one, find the amount of profit that can be realized by taking advantage of it, valued at the end of the year, per share of Apple. Assume that there are no taxes, no expenses to trading, and you can borrow and lend at the risk-free rate.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92408329

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