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1 8 . Suppose the spot price of a stock index is S 0 = 2 , 0 0 0 and the risk - free

18. Suppose the spot price of a stock index is S0=2,000 and the risk-free interest rate is 2% per year. The index pays dividends at a rate of 1% per year. The theoretical forward price for a one-year contract is F0=2,020, but the market forward price is F0=2,050. Describe an arbitrage strategy if an opportunity exists.
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