Markets: A Rigorous Course

M14 · Problem 26 ★★ Check

Short via SLB or via the future

A stock trades at ₹1,000 and pays no dividend before expiry; its one-month future trades at ₹1,002; r=6.5%r = 6.5\%. (a) Compute the implied borrow fee (14.17), annualised. (b) A retail trader can borrow through SLB for one month at a fee of ₹3 per share; the sale proceeds earn nothing. STT is 0.1% on each delivery leg and 0.05% on the sale of a future. If the stock ends the month at ₹1,000, compute the cost per share of each way of being short (a negative cost is a gain). (c) At what futures price would the two routes cost the same, given the ₹3 fee?

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Commas, ₹, % and 1e-3 notation are accepted.

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