The 4-month futures price on a non-dividend-paying stock is $52.00. The risk-free rate is 1.5% and the market rate is 9.0%. What is the spot rate for this stock if spot-futures parity exists?
A)$51.43
B)$51.74
C)$51.89
D)$52.23
E)$52.99

Question

Quizplus · Accepted Answer

The spot-futures parity formula is F = S * e^(rT), where F is the futures price, S is the spot price, r is the risk-free rate, and T is the time in years. Solving for S gives S = F / e^(rT). Substituting the given values: S = 52 / e^(0.015 * 4/12) = 51.74.

The 4-Month Futures Price on a Non-Dividend-Paying Stock Is $52