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Boring Unreliable Gadget Incs stock price S is $50 today It pays dividends of $1 after two months and $105 after five months The continuously compounded interest rate is 4 percent per year

Boring Unreliable Gadget Inc.’s stock price S is $50 today. It pays dividends of $1 after two months and $1.05 after five months. The continuously compounded interest rate is 4 percent per year. Transactions costs are $0.10 per stock traded, a $0.25 one-time fee for trading forward contracts, and no charges for trading bonds. If the six-month forward price is $51, demonstrate how to make arbitrage profits or explain why you cannot.

May 11 2020 View more View Less

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