Top hedge fund manager Diana Sauros believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $42. The stock will pay a dividend at year-end of $4.00. Assume that risk-free Treasury securities currently offer an interest rate of 1.7%
A stock is selling today for $75 per share. At the end of the year, it pays a dividend of $3 per share and sells for $84
You purchase 100 shares of stock for $40 a share. The stock pays a $2 per share dividend at year-end.
Consider the following scenario analysis: