Suppose that the risk$-$free interest rate is $8\%$ per annum with continuous compounding and that the dividend yield on a stock index is $3\%$ per annum with continuous compounding. The index is standing at $350$ and the futures price for a contract deliverable in $6$ months is $360.$

Question #$2.$ There

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an arbitrage opportunity. If there is an arbitrage opportunity, the strategy should to

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futures contracts and

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the shares underlying the index.