Finance Assignment | Top Essay Writing

If you need additional help with this question, read Part I of Lecture Note #2 on Arbitrage. You must own 100 shares of NoteBook three months from today. NoteBook will not pay any dividends over the next 3 months. You have the money to buy the shares today, if you wish. There is a futures contract calling for delivery of 100 shares of NoteBook three months from today. The current futures price is $140 per share.

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The price of NoteBook on the delivery day is unknown today. The interest rate for the next 3 months is 1%, per 3 months. That is, for every dollar that you will have in the bank you will get $1.01 after 3 months. a) What are two strategies that will enable you to have shares of NoteBook three months from today?

b) Suppose that the current spot price of NoteBook is also $140 per share. What is the best (that is, least costly) strategy TODAY that will enable you to have 100 NoteBook shares three months from today (which is also the futures delivery day)? Suppose that the current spot price of NoteBook is also $137 per share. What is the best (that is, least costly) strategy TODAY that will enable you to have 100 NoteBook shares three months from today (which is also the futures delivery day)?

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