Consider a single-stock futures contract on Exxon-Mobil stock. Consider the following scenario: Annualized, continuously...
50.1K
Verified Solution
Link Copied!
Question
Accounting
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 = 3.14%.
Annualized, continuously compounded risk-free interest rate for 5-month period: r = 6.71%.
Current spot price of Exxon Mobil stock: $153 per share.
Dividend per share of $0.75 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.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
