Suppose the 1-year futures price on the stock index is 1,624 with an index multiplier of $1, the value of the stock index currently is 1,600, the 1-year risk-free interest rate is 3%, and the year-end dividend that will be paid on a $1,600 investment in the index portfolio is $20.

A. Explain whether the contract is underpriced or overpriced?

B. Formulate a zero-cost-investment portfolio and determine the riskless profits you could earn.