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Consider a single-stock forward contract on Exxon-Mobil stock. Suppose that the contract expires before Exxon Mobil’s next cash dividend. Consider the following scenario:
Risk-free interest rate: r = 3.24% per year, continuously compounded.
Current spot price of Exxon Mobil stock: $107.88 per share.
Contract expiration: T = 3 months.
Futures price on Exxon Mobil single-stock futures: $100 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.
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Assume the spot exchange rate is 6.22 Chinese yuan per U.S. dollar. If the inflation rate in China is expected to be double that in the U.S. for the next two years, then what will happen to the yuan in comparison to the dollar?
Hawkeye mining corp. is close to exhausting its current mining resources. Consequently, the firm’s earnings and dividends are expected to decline at a constate rate of 6% per year. The most recent dividend $4.10 and the required return on the stock i..
Storico Co. just paid a dividend of $1.45 per share. The company will increase its dividend by 24 percent next year and will then reduce its dividend growth rate by 6 percentage points per year until it reaches the industry average of 6 percent divid..
What is the difference between a discriminating auction and a single-price auction? How is the final price determined in a single-price auction? Why did the Treasury switch to a single-price auction?
What is systemic risk?
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