What is net profit per share when futures contract expires

Assignment Help Financial Management
Reference no: EM131552726

Consider a single-stock futures contract on Apple stock. Consider the following scenario: Annualized, continuously compounded risk-free interest rate for 2-month period: r = 4.09%. Annualized, continuously compounded risk-free interest rate for 4-month period: r = 6.71%. Current spot price of Apple stock: $562 per share. Dividend per share of $0.7 in 2 months. Contract expiration: T = 4 months. Futures price on Apple single-stock futures: $600 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 and zero net cash flows in two months.

Reference no: EM131552726

Questions Cloud

Calculate the charge on each of the three spheres : Olive Oyal, a promising young physicist, has decided to recreate Millikan's famous oil-drop experiment using modern materials.
What was capital gains yield and percentage total return : Compute the percentage total return. What was the dividend yield? What was the capital gains yield?
Analyze the role of accreditation in health care industry : Evaluate what impact legal and regulatory requirements have on the development of organizational health care policies.
Principles of ethical communication : Which of the communications principles resonates with you the most - principles of ethical communication
What is net profit per share when futures contract expires : An arbitrage opportunity exists. What is the net profit per share when the futures contract expires?
Analyze medical liability for health care organizations : Explains how your company treats contracts,medical liability,& strategies created to prevent errors & avoid potential liability situations for the organization.
Discuss the advantages to perform a split-off and spin-off : Under what circumstances would you expect a corporation to perform a split-off? Spin-off? Split-up? Discuss the advantages and disadvantages.
Exists for boeing stock and single-stock futures contracts : Suppose that an arbitrage opportunity exists for Boeing stock and single-stock futures contracts.
Find the magnitude of the force exerted on any electron : The diagram in Fig. shows a pair of parallel plates 60mm long and separated by 12mm to which a power supply (not shown) is connected.

Reviews

Write a Review

Financial Management Questions & Answers

  Patterns are similar to the head-and-shoulders pattern

Double top and triple top patterns are similar to the head-and-shoulders pattern in that they indicate weakening in the buying pressure that has been driving an uptrend.

  Expects annual dividends-pay constant dividend amount

Lyons Corp. expects annual dividends of $0.55, $0.85, $1.15 a share over the next three years, respectively. In year 4 and thereafter, Lyons expects to pay a constant dividend amount of $2.00 a share. The required rate of return for Lyons is 9.0%, an..

  The interest earned on both the initial principal

the interest earned on both the initial principal and the interest reinvested from prior periods.

  What was the most recent dividend per share paid on stock

Feeback Corporation stock currently sells for $82 per share. The market requires a return of 10.2 percent on the firm’s stock. If the company maintains a constant 3.1 percent growth rate in dividends, what was the most recent dividend per share paid ..

  What is your total dollar return on investment

Four months ago, you purchased 1,200 shares of LBM stock for $9.30 a share. Last month you received a dividend payment of $.065 a share. Today, you sold the shares for $8.62 a share. What is your total dollar return on this investment?

  Compute the civil fraud penalty the irs may impose

Compute the civil fraud penalty the IRS may impose. Describe the procedural steps the IRS must take to charge the couple with criminal fraud. Why might the IRS decide to impose a civil fraud penalty on Mr. and Mrs. Jessel but not charge them with cri..

  An example of vertical integration

Which of the following is an example of vertical integration?

  Property that has starbucks as the major lessee

You are interested in buying a property that has Starbucks as the major lessee. The Starbucks lease has a current term of 15 years. The current lease is a net lease. This means that the landlord pays all taxes associated with the property and Starbuc..

  Firm is considering purchasing machine

A firm is considering purchasing a machine that costs 73,000. It will be used for six? years, and the salvage value at that time is expected to be zero. The machine will save 34,000 per year in? labor, but it will incur 13,000 in operating and mainte..

  Annual return mean and standard deviation

Woodpecker, Inc., stock has an annual return mean and standard deviation of 11.4 percent and 58 percent, respectively. What is the smallest expected loss in the coming month with a probability of 16.0 percent?

  What is the company unlevered cost of equity capital

What is the company’s cost of equity capital? What is the company’s unlevered cost of equity capital?

  Indifferent between buying and leasing

After deciding to buy a new car, you can either lease the car or purchase it on a four-year loan. The car you wish to buy costs $45,000. The dealer has a special leasing arrangement where you pay $600 per month starting today for the next four years...

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd