You find the following information in December 2019. Assume the T-bill maturity and futures delivery are on the same day. Ignore transactions costs. Treasury Bill Maturity DTM Bid Asked Mar 20 90 1.19 1.18 Index Futures S&P 500 Index (CME) – 250 x index, cents per unit Open High Low Settle Mar 20 3324 3326 3320 3322 S&P 500 closed at $3329 on the same day. Suppose that if you buy one unit of S&P 500 index today, you will be entitled to a 2% dividend yield in March. Design a zero net investment arbitrage strategy involving: (1) buying the index for $3329, (2) shorting the futures for no cash now, (3) and borrowing $3329 at the spot rate. Show your profit per one futures contract (250 units of the index).
You find the following information in December 2019. Assume the T-bill maturity and futures delivery are on the same day. Ignore transactions costs.
Treasury Bill
Maturity DTM Bid Asked
Mar 20 90 1.19 1.18
Index Futures
S&P 500 Index (CME) – 250 x index, cents per unit
Open High Low Settle
Mar 20 3324 3326 3320 3322
S&P 500 closed at $3329 on the same day.
Suppose that if you buy one unit of S&P 500 index today, you will be entitled to a 2% dividend yield in March. Design a zero net investment arbitrage strategy involving: (1) buying the index for $3329, (2) shorting the futures for no cash now, (3) and borrowing $3329 at the spot rate. Show your profit per one futures contract (250 units of the index).
| a. |
$12,395 |
|
| b. |
$10,114 |
|
| c. |
$18,948 |
|
| d. |
$11,639 |
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