Question
The S&P 500 index is 2700 now. The price of a 1-year index futures contract is 2781, and 2-year index futures contract is 2920. Imagine
The S&P 500 index is 2700 now. The price of a 1-year index futures contract is 2781, and 2-year index futures contract is 2920.
Imagine a bank lets you enter into a forward contract to either borrow or lend between years 1 and 2 at 4%. Is this consistent with the spot and futures prices? Could you make a portfolio that would exploit any inconsistencies?
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Analysis for Financial Management
Authors: Robert C. Higgins
10th edition
007803468X, 978-0078034688
