Consider the futures contract on XYZ Inc. stock. Suppose that the annual dividend yield for the stock is 2.5% and the risk-free rate is 6.3%. Both rates are based on continuous compounding. The current futures price of the XYZ Inc. futures contract maturing in 18 months is $900 per share. Assume that the no arbitrage Futures-Spot parity when asset provides a known yield holds. What is the current spot price of XYZ Inc. per share? Please explain and show calculation.   a. $934.39 b. $952.79 c. $850.13 d. $900.00 e. $944.37

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Consider the futures contract on XYZ Inc. stock. Suppose that the annual dividend yield for the stock is 2.5% and the risk-free rate is 6.3%. Both rates are based on continuous compounding. The current futures price of the XYZ Inc. futures contract maturing in 18 months is $900 per share. Assume that the no arbitrage Futures-Spot parity when asset provides a known yield holds. What is the current spot price of XYZ Inc. per share? Please explain and show calculation.

 

a. $934.39

b. $952.79

c. $850.13

d. $900.00

e. $944.37

 

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