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Suppose the CAC-40 Index (a widely followed index of French stock prices) is currently at 4,920, the expected dividend yield

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Answer #1

No-arbitrage price of futures = spot price * e(r-d)*t,

where r = risk free rate

d = dividend yield

t = time to expiration in years.

No-arbitrage price of futures = 4920 * e(0.06-0.02)*(6/12)

No-arbitrage price of futures = 5019.39.

If the futures are trading at 4952, the futures are underpriced, and you would want to buy the futures and sell the index in the spot market.

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Answer #2

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CDB stock is currently priced at $63. The company will pay a dividend of $4.81 next year and investors require a return of 11.1 percent on similar stocks. What is the dividend growth rate on this stock?

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Answer #3

CDB stock is currently priced at $63. The company will pay a dividend of $4.81 next year and investors require a return of 11.1 percent on similar stocks. What is the dividend growth rate on this stock?


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