A stock index is valued at $800 and pays a continuous dividend at the rate of 3% per year. The 6-month futures contract on that
index is trading at $758. The continuously compounded risk free rate is 2.5% per year. There are no transaction costs or taxes. Is the futures contract priced so that there is an arbitrage opportunity? If yes, which of the following numbers comes closest to the arbitrage profit you could realize by taking a position in one futures contract?
Based on the provided information, the no-arbitrage futures price is calculated as follows: 800e(0.025-0.03)*0.50 =798−As the market price of the futures contract is lower than this calculated price, an arbitrage opportunity is present. It is possible to purchase the futures contract and sell the index.−
That statement is incorrect. External factors can significantly alter the meaning of messages transmitted in the communication between the sender and receiver. For instance, if someone encounters issues at work, they may struggle to communicate effectively with their children at home.
