A three-month forward contract on an index is trading at 756, while the index itself is at

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A three-month forward contract on an index is trading at 756, while the index itself is at 750. The three-month interest rate is 6%.

(a) What is the implied dividend yield on the index?

(b) You estimate the dividend yield to be 1% over the next three months. Is there an arbitrage opportunity from your perspective?

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Derivatives Principles And Practice

ISBN: 9780078034732

2nd Edition

Authors: Rangarajan Sundaram

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Question Posted: Jan 10, 2024 01:00 AM

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A three-month forward contract on an index is trading at 756, while the index itself is at

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The forward to spot relationship for this contract is as follows 750 exp006 d 025 75...View the full answer

Derivatives Principles And Practice

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