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Suppose that the risk-free interest rate is8%per annum with continuous compounding and that the dividend yield on a stock index is3%per annum with continuous compounding.The

Suppose that the risk-free interest rate is8%per annum with continuous compounding and that the dividend yield on a stock index is3%per annum with continuous compounding.The index is standing at350and the futures price for a contract deliverable in6months is360.

1)What should be the theoretical futures price for the stock index?

2)What arbitrage opportunities does this create?

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