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Suppose the current level of the S&P 500 is 1225. The risk-free interest rate per year is 3%. Assume negligible dividends. The 3-month S&P 500
- Suppose the current level of the S&P 500 is 1225. The risk-free interest rate per year is 3%. Assume negligible dividends. The 3-month S&P 500 futures contract is trading at 1234.09. Is there an arbitrage opportunity? Briefly explain.
Select one:
- There IS NOT an arbitrage opportunity. The 3-month futures contract is trading below the fair price of 1243.24
- There IS an arbitrage opportunity. The 3-month futures contract is trading below the fair price of 1243.24.
- There IS NOT an arbitrage opportunity. The 3-month futures contract is trading at the fair price of 1234.09.
- There IS an arbitrage opportunity. The 3-month futures contract is trading above the fair price of 1231.08.
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