Question
The S&R index spot price is 1100, the continuously compounded risk-free rate is 5%, and the continuous dividend yield on the index is 2%. (a)
The S&R index spot price is 1100, the continuously compounded risk-free rate is 5%, and the continuous dividend yield on the index is 2%.
(a) Suppose you observe a 6-month forward price of 1120. What arbitrage would you undertake?
(b) Suppose you observe a 6-month forward price of 1110. What arbitrage would you undertake?
*YOU MUST ANSWER WITH DETAILED WORKING!!
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Financial Management For Nurse Managers And Executives
Authors: Cheryl Jones, Steven A. Finkler, Christine T. Kovner
4th Edition
