Question 2: You work at the Arbitrage Desk of MC Asset Management (MCAM), a fund management company. Aside from managing stock portfolios, the company also do proprietary trading, largely index arbitrage. You now notice the following quotations on your screen. KLCI Index = 750 points I 3-month futures = 746.64 points (maturing 90 days) Rf rate = 4% Dividend yield = 1.75% a-Proof that arbitrage is possible (what is the fair price) b- Outline the appropriate strategy and determine the arbitrage profit assuming that KLCI index is at 775 points in 90 days. 5. A security is currently trading at $97. It will pay a coupon of $5 in two months. No other payouts are expected in the next six months. (a) If the term structure is flat at 12%, what should the be forward price on the security for delivery in six months? (b) If the actual forward price is 592, explain how an arbitrage may be created