The 3-Month Futures Price on a Non-Dividend-Paying Stock Is $31

question 56

Multiple Choice

The 3-month futures price on a non-dividend-paying stock is $31.80.The risk-free rate is 2.5 percent and the market rate is 9.5 percent.What is the spot rate for this stock if spot-futures parity exists?

• A) $31.39
• B) $31.43
• C) $31.51
• D) $31.60
• E) $31.78

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Definitions:

Unconscionable

Refers to something not right or fair, often in a legal context to describe terms that are excessively unfair to one party.

Benefits

Various forms of value, such as medical insurance, retirement plans, or paid leave, provided to employees in addition to wages or salaries.

Agreement

A meeting of two or more minds in regard to the terms of a contract; usually broken down into two events—an offer by one party to form a contract, and an acceptance of the offer by the person to whom the offer is made.

Illegal Contract

A contract that is void and unenforceable from the outset because it involves activities that are against the law or public policy.