The spot price for a non-dividend-paying stock is $24. The risk-free rate is 2.8% and the market rate is 10.6%. What is the 6-month futures price of this stock if spot-futures parity exists?
A)$24.33
B)$24.41
C)$24.54
D)$24.59
E)$24.70

Question

Quizplus · Accepted Answer

The futures price is calculated using the formula: Futures Price = Spot Price * e^(risk-free rate * time). Here, Spot Price = $24, risk-free rate = 2.8% or 0.028, and time = 0.5 years. So, Futures Price = 24 * e^(0.028 * 0.5) ≈ $24.33.

The Spot Price for a Non-Dividend-Paying Stock Is $24