The Spot Rate on a Non-Dividend-Paying Stock Is $42

question 33

Multiple Choice

The spot rate on a non-dividend-paying stock is $42.30.The risk-free rate is 3.75 percent and the market rate is 11.50 percent.What is the three-month futures rate if spot-futures parity exists?

• A) $42.14
• B) $42.54
• C) $42.69
• D) $42.82
• E) $43.89

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Definitions:

Fiduciary Relationship

A legal and ethical relationship of trust where one party, the fiduciary, acts in the best interest of another, the principal or beneficiary.

Model Business Corporation Act

A model set of laws prepared by legal experts to guide the states in the development of their corporation statutes.

UCC

Known as the Uniform Commercial Code, this significant body of law sets the standards for commercial transactions throughout the United States.

Uniform

Consistently the same in character or degree; in legal contexts, it often refers to laws that are the same across all jurisdictions within a certain area.