If the Prepaid Forward Contract on a Non-Dividend Paying Stock

question 5

Multiple Choice

If the prepaid forward contract on a non-dividend paying stock sells for $85.25 and the annual required rate of return on the stock is 6.5%, which of the following 1 year forward contract prices does NOT represent an arbitrage opportunity?

• A) $ 85.25
• B) $ 89.56
• C) $ 90.98
• D) $ 91.32

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Definitions:

Foster Placement

The arrangement for a child to live temporarily with a substitute family when their own family cannot care for them, often part of child welfare services.

Acting Out

A behavior in which an individual expresses their emotions or conflicts through actions rather than words, often negatively.

Positive Changes

Alternations that lead to improvement or beneficial outcomes in an individual's life, group dynamics, or organizational performance.

Generalize

Generalize involves drawing broad conclusions from specific instances, extending findings or observations to larger populations or situations.