Question
4. Suppose the S&P portfolio pays dividend equal to 1% of its total value over the course of the next year. The current value is
4. Suppose the S&P portfolio pays dividend equal to 1% of its total value over the course of the next year. The current value is 1500. The T-bill rate is 4% annually. Suppose the S&P futures price for delivery in 1 year is 1550. What are the profits one year hence from borrowing at the risk-free rate and buying a share of the S&P 500 while going short a futures contract?
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Public Finance
Authors: Harvey S. Rosen
5th Edition
025617329X, 978-0256173291
