On June 8, the S&P 500 index is at 3150, and the September index futures contract, expiring on September 20 (73 days from now) is at 320.

Assume the dividend yield on the S&P 500 is an annual 2%.

The annual risk-free rate is a continuously-compounded 7%.

The multiplier on the futures contract is $250.

Assume that you start with a $10 million long or short position (you will have to determine whether to take a long or a short position) in stocks that replicate the S&P 500 index.

a. What is the implied continuously compounded one-year repo rate?

b. Clearly outline an arbitrage strategy to profit from these prices.

c. If on August 1, the S&P 500 index is at 3000 and the September index futures contract, expiring on September 20 is at 3020 then what is the arbitrage profit on August 1?