ESS. OF INVESTMENTS - ETEXT ACCESS CARD
ESS. OF INVESTMENTS - ETEXT ACCESS CARD
11th Edition
ISBN: 9781265909055
Author: Bodie
Publisher: MCG
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Chapter 17, Problem 27C
Summary Introduction

(a)

To calculate:

In this part of the problem we have to find out whether the futures contract is mispriced or not. For this we have to find out contract's current value on the basis of the information and then compare to its current value for finding out whether it's priced correctly or not.

b

Summary Introduction

In this part of the problem we have to find out the zero net investment arbitrage portfolio This can be done by creating a portfolio in which we buy mispriced futures, sell expensive stocks and lend the money made from short sale.

Summary Introduction

(c)

In this part of the problem we have to find out whether the profit of 4 will still be available if there is no interest available on lending the proceeds of a short sale.

Summary Introduction

(d)

In this part of the problem we have to find out the no arbitrage band.

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