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Question 1Assume it is now 17 January 2020 and the KLSE composite index is at 1146. The risk-free interest rate is 5% p.a. The weighted

Question 1Assume it is now 17 January 2020 and the KLSE composite index is at 1146. The risk-free interest rate is 5% p.a. The weighted average dividend yield of the KLSE composite index is 2.3% p.a. What would be the fair value of the June 2020 KLSE CI futures contract?

We now also have the following information:

Spot price1146.00

Actual futures price1192.50

a. Is the June futures contract mispriced?

b. How could you take advantage of this situation?

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