A Stock That Pays No Dividends Has a Price of $50

question 15

Multiple Choice

A stock that pays no dividends has a price of $50. The one-month maturity, at-the-money European call and put are trading at $10 and $9.90, respectively. The one-month forward price of the stock is:

• A) 49.90
• B) 50.00
• C) 50.10
• D) 50.20

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Definitions:

Net Float

The difference between checks written and deposited but not yet cleared, affecting a company's available cash balance.

Deposited

The act of placing money into a financial account or institution for safekeeping or to earn interest.

Cheques

Non-cash forms of payment that order a bank to pay a specific amount of money from a person's account to another individual or company's account.

Lockbox System

A service offered by banks to companies for the collection of payments from customers, utilizing a special post office box to speed up the deposit of checks.