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1. Suppose that the risk-free interest rate is 6% per annum with continuous compounding and that the dividend yield on a stock index is 4%

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1. Suppose that the risk-free interest rate is 6% per annum with continuous compounding and that the dividend yield on a stock index is 4% per annum. The index is standing at 400, and the futures price for a contract deliverable in four months is 405. What arbitrage opportunities does this create? Show in detail how you are going to carry out this arbitrage

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