Q5. Arbitrage profits an investor told are risk less profits. You take simultaneous but opposite positions in two markets to reap gains from pricing disparities. Acting on this belief, his friend tried to find the arbitrage profit by trading simultaneously in futures and stock index.

He has collected to the following information:

Pricing level of stock index _- 3000

Index futures priced at 2000

Risk free rate of return - l0%p.a.

50% stocks are to pay dividcnds at 6%

The index futures has a multiple of 100

The future has six months to expiration.

Required

(a) Find arbitrage profits, if any.