The Spot Price for a Non-Dividend-Paying Stock Is $24

question 101

Multiple Choice

The spot price for a non-dividend-paying stock is $24. The risk-free rate is 2.8% and the market rate is 10.6%. What is the 6-month futures price of this stock if spot-futures parity exists?

• A)$24.33
• B)$24.41
• C)$24.54
• D)$24.59
• E)$24.70

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Definitions:

Time Horizons

The length of time over which an investment is expected to be held before it is liquidated, ranging from short-term to long-term periods.

Casualty Insurance

Insurance coverage for loss or liability stemming from a sudden, accidental event.

Equity Securities

Financial assets representing ownership interest in a company, such as stocks, which provide income through dividends and potential for capital gain.

Home Ownership

Home ownership refers to holding the title to a residential property, giving the owner the right to use, occupy, and modify it as they see fit, subject to legal restrictions.