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