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A stock index is computed as the price weighted average of two stocks A and B. An index futures contract that expires in 60 days
A stock index is computed as the price weighted average of two stocks A and B. An index futures contract that expires in 60 days is considered. The continuously compounded interest rate is 10% per annum. R300 can be borrowed at this interest rate to buy these stocks. Dividends can also be re-invested at this interest rate. The following information is available. A B Price R100 R200 Dividend R1.50 R2.00 Time to Dividend 10 days 15 days a) Calculate the
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