16. Index Arbitrage (LO3, CFA1) Suppose the CAC-40 Index (a widely followed index of French stock prices)

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16. Index Arbitrage (LO3, CFA1) Suppose the CAC-40 Index (a widely followed index of French stock prices) is currently at 4,920, the expected dividend yield on the index is 2 percent per year, and the risk-free rate in France is 6 percent annually. If CAC-40 futures contracts that expire in six months are currently trading at 4,952, what program trading strategy would you recommend?

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Asim farooq

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