Consider a single-stock futures contract on Exxon-Mobil stock. Consider the following scenario: Annualized, continuously...
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Accounting
Consider a single-stock futures contract on Exxon-Mobil stock. Consider the following scenario:
- Annualized, continuously compounded risk-free interest rate for 3-month period: r = 3.14%.
- Annualized, continuously compounded risk-free interest rate for 5-month period: r = 6.71%.
- Current spot price of Exxon Mobil stock: $153 per share.
- Dividend per share of $0.75 in 3 months.
- Contract expiration: T = 5 months.
- Futures price on Exxon Mobil single-stock futures: $150 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.
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