Exhibit 21.10 Use the Information Below for the Following Problem(S)

question 49

Multiple Choice

Exhibit 21.10
Use the Information Below for the Following Problem(S)
The S&P 500 stock index is at 1300. The annualized interest rate is 4.0% and the annualized dividend is 2%. You are currently considering purchasing a 2-month futures contract for your portfolio.
-Refer to Exhibit 21.10.If the futures contract was currently available for 1280,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.

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Definitions:

Inhibitions

Mental or psychological processes that restrain or hold back one's actions, emotions, or thoughts.

Milgram's Obedience Experiments

Milgram's obedience experiments were a series of studies that demonstrated people's willingness to obey authority figures, even to the extent of inflicting harm on others.

Learning

The acquisition of knowledge or skills through experience, study, or being taught.

Gazing Upward

An action often associated with thinking, recalling information, or seeking inspiration.