Part A: The S&P portfolio pays a dividend yield of 1% annually. Its current value is 1,500. The T-bill rate is 4%. Suppose the S&P futures price for delivery in 1 year is 1,550. Construct an arbitrage strategy to exploit the mispricing and show that your profits 1 year hence equal the mispricing in the futures market (6 marks) Part B: Suppose that the value of the S&P 500 stock index is 1,600 a. If each futures contract costs $25 to trade with a discount broker, how much is the transaction cost per dollar of stock controlled by the futures contract? (2 marks) b. If the average price of a share on the NYSE is about $40, how much is the transaction cost per "typical share" controlled by one futures contract? (5 marks) c. For small investors, a typical transaction cost per share in stocks directly is about 10 cents per share. How many times the transactions costs in futures markets is this? (2 marks)