The S&R index spot price is 1100, the risk-free rate is 5%, and the continuous dividend yield
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The S&R index spot price is 1100, the risk-free rate is 5%, and the continuous dividend yield on the index is 2%.
a. Suppose you observe a 6-month forward price of 1120. would you undertake? What arbitrage
b. Suppose you observe a 6-month forward price of 1110. What arbitrage would you undertake? LO.1
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