If You Determine That the S&P 500 Index Futures Is

question 49

Multiple Choice

If you determine that the S&P 500 Index futures is overpriced relative to the spot S&P 500 Index, you could make an arbitrage profit by

• A) buying all the stocks in the S&P 500 and selling put options on the S&P 500 Index.
• B) selling short all the stocks in the S&P 500 and buying S&P Index futures.
• C) selling all the stocks in the S&P 500 and buying call options on the S&P 500 Index.
• D) selling S&P 500 Index futures and buying all the stocks in the S&P 500.
• E) None of the options are correct.

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Definitions:

Consumer's Income

The total amount of earnings available to an individual or household to spend or save after taxes.

Budget Line

A graphical representation showing all possible combinations of two goods that can be purchased with a given budget at current prices.

Money Income

The total amount of money or monetary earnings received by an individual or household over a certain period of time.

Budget Line

A graphical representation of all possible combinations of two goods that a consumer can afford with their income level.