Exhibit 21.5 Use the Information Below for the Following Problem(S)

question 34

Multiple Choice

Exhibit 21.5
Use the Information Below for the Following Problem(S)
The S&P 500 stock index is at 1100. The annualized interest rate is 3.5% and the annualized dividend is 2%.
-Refer to Exhibit 21.5.If the futures contract was currently available for 1250,indicate the appropriate strategy that would earn an arbitrage profit.

• A) Long futures, and short the index.
• B) Short futures and long the index.
• C) Long futures and long the index.
• D) Short futures and short the index.
• E) None of the above.

---

Definitions:

W-2 Forms

Official tax documents that employers send to employees and the IRS, reporting the employee's annual wages and the amount of taxes withheld from their paycheck.

Employer's Payroll Taxes

Taxes that employers are required to pay on behalf of their employees, including Social Security and Medicare taxes.

FICA-OASDI

Federal Insurance Contributions Act - Old Age, Survivors, and Disability Insurance; a payroll tax that funds Social Security and Medicare in the United States.

FICA-Medicare

Refers to the portion of the Federal Insurance Contributions Act tax that is allocated to Medicare, funding hospital insurance benefits.