INVESTMENTS(LL)W/CONNECT
11th Edition
ISBN: 9781260433920
Author: Bodie
Publisher: McGraw-Hill Publishing Co.
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Chapter 22, Problem 16PS
Summary Introduction
To compute: The arbitrage strategy required to exploit the mispricing in future market. Supposing that S&P futures price for delivery in 1 year is 2,050, current value is 2,000, T-bill rate is 4%.
Introduction:
Arbitrage: Arbitrage can be termed as that transaction done through which there is a chance of two assets producing the same results but may sell at different prices. Arbitrage is important due to the fact the when there is a huge purchase of assets which are cheaper, its price will increase. On the other hand, when an asset is sold at a high price, its price will decrease.
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