B) You believe that the Malaysian stock market is expected to underperform the Hong Kong stock market. You would like to use FBMKLCI futures and Hang Seng Index Futures to make profit. What is the best strategy to make profit by using the two index futures? Name the strategy.

(A) Given the below information: FBM KLCI = 1660 points Annual Dividend yield = 2% Annualized risk-free rate = 3% Storage cost = 1% Time to maturity = 3 months 3-month FBM KLCI futures =1680.00 Calculate the fair price of the corresponding CI futures. What strategy can you formulate to make profit from pricing differential? (8 marks) (A) Given the below information: FBM KLCI = 1660 points Annual Dividend yield = 2% Annualized risk-free rate = 3% Storage cost = 1% Time to maturity = 3 months 3-month FBM KLCI futures =1680.00 Calculate the fair price of the corresponding CI futures. What strategy can you formulate to make profit from pricing differential? (8 marks)