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Suppose That the Futures Index for the S&P 500 for Delivery

question 55

Essay

Suppose that the futures index for the S&P 500 for delivery one year from now is selling for $960,000, whereas the stocks are selling for $900,000. If the one-year Treasury bill rate is 5%, is it possible to use index arbitrage to make a profit?


Definitions:

Negative Reinforcement

A behavioral principle where a response is strengthened by the removal or avoidance of an unpleasant stimulus.

Desired Response

The specific reaction or outcome that is aimed for or anticipated in a particular situation, experiment, or communication.

Secondary Reinforcer

An artificial or learned stimulus that gains its reinforcing power through its association with a primary reinforcer, often used in behavior modification programs.

Operant Reinforcer

Operant Reinforcer is any stimulus which strengthens or increases the probability of a specific response by means of reward or punishment following that response.

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