The S&P portfolio pays a dividend yield of 1% annually. Its current value is 2,000. The T-bill

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The S&P portfolio pays a dividend yield of 1% annually. Its current value is 2,000. The T-bill rate is 4%. Suppose the S&P futures price for delivery in 1 year is 2,050. Construct an arbitrage strategy to exploit the mispricing and show that your profits 1 year hence will equal the mispricing in the futures market.

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Investments

ISBN: 9781259277177

11th Edition

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

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