On September 13, 2009, the S&P 500 Index futures settlement price was 1016.70 for December 2009 delivery contract. The actual S&P 500 index (spot market) was closed at 1003.35 on 09/13/2009. The dividend yield is estimated currently at 2.12% (source: http://www.indexarb.com/dividendAnalysis.html). The actual delivery date of the December contract is 12/19/2009. The LIBLOR rate is 3.675% on September 13, 2009, which can be treated as a risk-free rate. Asssume the dividend yield and LIBOR rate are continously compounded.rates. Use the actual/360 day count method.

A) Are the futures price and the spot index in equilibrium? That is, is there an arbitrage opportuity between the futures market and the spot market? What is the basis for your answer?

B) Show the steps to find any arbitrage profit opportunity. Calculate the arbitrage profit which should be zero if the market is in equilbrium, positive if not. Be sure to show your calculations step by step.

S0=	1,003.35		9/13/2009
T=	97 days		12/19/2009
f(0,T)=	1,016.70
Rf=	3.675%
DivYld	2.120%