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Consider a single-stock futures contract on Apple stock. Consider the following scenario: Annualized, continuously...

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Finance

Consider a single-stock futures contract on Apple stock. Consider the following scenario:

  • Annualized, continuously compounded risk-free interest rate for 2-month period: r = 2.95%.
  • Annualized, continuously compounded risk-free interest rate for 4-month period: r = 5.65%.
  • Current spot price of Apple stock: $562 per share.
  • Dividend per share of $0.62 in 2 months.
  • Contract expiration: T = 4 months.
  • Futures price on Apple single-stock futures 4 months from now: $600 per share.

An arbitrage opportunity exists. What is the net profit per share when the futures contract expires? Use a strategy that has zero net cash flows today and zero net cash flows in two months.

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