1. What is your risk-free arbitrage profit available if a six-month option pair has a strike price of $150, a spot price of $147, a call premium of $10, a put premium of $11, and the risk-free rate is 6%?
2. Using an 8 percent rate of return, Bill Black finds that the discounted value of the $10 dividend payment expected to be received each year over the next 5 years to be 9.25, 8.57, 7.94, 7.35, and 6.81, respectively. What is the value of the stock he is looking to purchase, calculated with the general dividend-valuation model?
A : $46.00
B : $41.08
C : $50.00
D : $39.92
2. Assume the following information:
1-year interest rate on U.S. dollars = 5.7%
1-year interest rate on Singapore dollars = 12.7%
Spot rate of Singapore dollar = 0.4 USD/SGD
If interest rate parity is in effect, what should be the 1 year forward rate on the SGD?