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Question IV: The S&R index spot price is 1100 and the continuously compounded risk-free rate is 5%. You observe a 9-month forward price of 1129.257.

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Question IV: The S&R index spot price is 1100 and the continuously compounded risk-free rate is 5%. You observe a 9-month forward price of 1129.257. (a) What dividend yield is implied by this forward price? (b) Suppose you believe the dividend yield over the next 9 months will be only 0.5%. What arbitrage would you undertake? (c) Suppose you believe the dividend yield will be 3% over the next 9 months. What arbitrage would you undertake? Question IV: The S&R index spot price is 1100 and the continuously compounded risk-free rate is 5%. You observe a 9-month forward price of 1129.257. (a) What dividend yield is implied by this forward price? (b) Suppose you believe the dividend yield over the next 9 months will be only 0.5%. What arbitrage would you undertake? (c) Suppose you believe the dividend yield will be 3% over the next 9 months. What arbitrage would you undertake

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