Please solve ASAP with formulas/explanation. Provide an arbitrage trading strategy as well. Will upvote! Thank you in advance! 1- The spot price of the S&P 500 index is currently at 1200 per share. The 3-month futures price is the same as the spot price. The simple interest rate is 2% for 3 months and the simple dividend yield is 1% for 3 months.
Please solve ASAP with formulas/explanation. Provide an arbitrage trading strategy as well. Will upvote! Thank you in advance! 1- The spot price of the S&P 500 index is currently at 1200 per share. The 3-month futures price is the same as the spot price. The simple interest rate is 2% for 3 months and the simple dividend yield is 1% for 3 months.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please solve ASAP with formulas/explanation. Provide an arbitrage trading strategy as well. Will upvote! Thank you in advance!
1- The spot price of the S&P 500 index is currently at 1200 per share. The 3-month futures price is the same as the spot price. The simple interest rate is 2% for 3 months and the simple dividend yield is 1% for 3 months.
(a) Calculate the arbitrage-free futures price.
(b) Provide an arbitrage trading strategy.
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