Suppose that the risk-free interest rate is 10% per annum with continuous compounding and the dividend yield on a stock index is 4% per annum. The index is standing at 400 and the futures price for a contract deliverable in four months is 405. What arbitrage opportunities does this create?

The share price of your favourite company is currently traded at a price of £60 and interest is compounded continuously at rate 3.7% per year. Assume that the share evolves according to a discrete time LogNormal process with time measured in years, drift µ = 0.15 and volatility o = 0.24. You decide to buy a European call option with a strike price of £63 and an expiration date of two years from now. What is the no-arbitrage price for this option? State your answer to the nearest pence. Do not enter the pound sign.

A stock has a current price of 50. The continuously compounded risk - free interest rate is 8%. The stock is going to pay a dividend of 0.5 one month from now and another dividend of 1 five months from now. Suppose that the market prepaid forward price of a prepaid forward contract that delivers one share after 6 months is 49. Construct an arbitrage portfolio and give the arbitrage profit.

Find the implied volatility (to 2 decimals, for example, �=8.23% ) of a Put option with a time to expiration of 11 months and a price of $6.13 The stock is currently trading at $47. The riskless rate is 2% per annum, and the strike/exercise price of the option is $50. Hint: compute the Put price using the same formula as in exercise 4 , as a function of the volatility �. Then use Solver to change the volatility cell in order to obtain a price of $6.13 \table[[�1=,-0.0614997,,So =,47],[�2=,,4,�=,50],[,,,�=,2%

Suppose the 6-month Mini S&P 500 futures price is 1,168.44, while the cash price is 1,150.55. What is the implied dividend yield on the S&P 500 if the risk-free interest rate is 4.3 percent? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Implied dividend yield %