You are considering a futures position in the futures contract written on the STAR Index. This is an index consisting of technology stocks that specialise in inter-planetary travel, and the current index level is 18,746. Assume that is possible to short sell the index. The future value of dividends expected to be paid over the next year is $376 and the 1-year interest rate is 4%. a.Suppose the expected rate of return on the STAR index is 12%. What is the expected levelof the index in one year? [2 marks] b.What is the theoretical no-arbitrage price for a 1-year futures contract on the STAR Index? [2 marks] c.Suppose the actual futures price is 19,000. Is there an arbitrage opportunity here? If so, howwould you exploit it? [3 marks] d.It is also possible to trade in options contracts on the STAR Index. Briefly distinguish thekey distinctions between futures and options contracts. [3 marks] END OF