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The risk-free rate of interest for borrowing is 4.4% per annum with continuous compounding, and the corresponding risk-free rate for lending is 1% per annum
The risk-free rate of interest for borrowing is 4.4% per annum with continuous compounding, and the corresponding risk-free rate for lending is 1% per annum lower. The dividend yield is 1.6% per annum. The current value of a stock index is 1,431 . There are no other transactions costs involved in spotiutures arbitrage. What is the width of the no-arbitrage window for a futures contract with six months to maturity? Use one decimal place for your answer. 7.2 margin of error +/0.2 The upper limit of the no-arbitrage window depends on transaction costs involved in arbitraging over-priced forward contracts. The lower limit depends on the transaction costs involved in arbitraging under-priced forward contracts. The width of the no-arbitrage window is equal to the upper limit minus the lower limit
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