Consider a four-month futures contract on a stock index. Suppose that the present level of the index is 2,013 , the dividend yield on the index is 3.1%, and the four-month rate of interest is 2%. (Assume that you can borrow and lend at this rate.) Suppose the futures contract has a single marking-tomarket once at the end of the contract. The index futures price should be $2,005.63, but the observed level of the index futures is $1,851.96 leading to an arbitrage opportunity of $153.67, which is obtained by: Buy a forward contract to purchase one unit of the index for $1,851.96 in four months; Buy 0.9897 units of the index for $1,992.31 : Invest $20.69 to cover the dividends from the shorted unit; Invest 2,013.00 for 4 months at 2%. Sell a forward contract to deliver one unit of the index for $1,851.96 in four months; Buy 0.9897 units of the index for \$1,992.31: Reinvest all dividends into buying more of the index; Borrow \$1,992.31 for 4 months at 2%. Sell a forward contract to purchase one unit of the index for $1.851.96 in four months; Short 0.9897 units of the index for $1,992.31; Invest $20.69 to cover the dividends from the shorted unit; Invest 2,013.00 for 4 months at 2%. Buy a forward contract to purchase one unit of the index for $1,851.96 in four months: Short 0.9897 units of the index for $1,992.31; Borrow $20.69 at 2% to cover the dividends from the shorted unit: Invest 2,013,00 for 4 months at 2%