Actuarial Outpost
 
Go Back   Actuarial Outpost > Exams - Please Limit Discussion to Exam-Related Topics > SoA/CAS Preliminary Exams > Investment / Financial Markets
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions



Investment / Financial Markets Old Exam MFE Forum

Reply
 
Thread Tools Search this Thread Display Modes
  #1  
Old 11-12-2018, 11:45 AM
smarterthancandee smarterthancandee is offline
Member
Non-Actuary
 
Join Date: Aug 2015
Location: Harrisburg, Pennsylvania
Studying for MFE
College: BU Alumna
Favorite beer: Butterbeer
Posts: 43
Default Question #21 on SOA website

The answer they give is since the forward price should be 110*e^(.05-.02)*.5 = 111.66, you sell the forward and buy the synthetic forward and the profit is 112-111.66 = .34.

my problem with this is: The synthetic forward is buy the index & borrow. So you would borrow 110 and then at the end of six months, you would owe 110*e^.05*.5 = 112.78. And in those six months you would have earned dividends of 110*(1-e^.02*.5) = 1.106. So once you subtract those off,
you owe 112.78- 1.106 = 111.68. But then you can sell the stock for 112 and have a profit of 112-111.68 = .32
__________________

P FM MFE STAM LTAM SRM PA
VEE: Mathematical Statistics, Economics, Accounting & Finance
Reply With Quote
  #2  
Old 11-12-2018, 12:59 PM
tkt's Avatar
tkt tkt is offline
Member
CAS SOA
 
Join Date: Jun 2011
Location: Des Moines
College: Drake University
Posts: 519
Default

See if the following Adapt solution helps:

__________________
Tong Khon Teh, FSA, CFA
Product Manager, Actuarial
coachingactuaries.com
Reply With Quote
  #3  
Old 11-12-2018, 01:22 PM
smarterthancandee smarterthancandee is offline
Member
Non-Actuary
 
Join Date: Aug 2015
Location: Harrisburg, Pennsylvania
Studying for MFE
College: BU Alumna
Favorite beer: Butterbeer
Posts: 43
Default

okay, so they're buying less than 1 share, thank you!
__________________

P FM MFE STAM LTAM SRM PA
VEE: Mathematical Statistics, Economics, Accounting & Finance
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 09:47 PM.


Powered by vBulletin®
Copyright ©2000 - 2019, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.17713 seconds with 9 queries