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

question 17

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 these.

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Definitions:

Retroactive Changes

Adjustments made to records, policies, or financial statements that apply to previous periods.

Loss on Disposal

The financial loss incurred when an asset is sold for less than its book value.

Accumulated Depreciation

The cumulative depreciation of an asset up to a single point in its life, representing how much of the asset's value has been used up.

Gain Reported

The difference reported in financial statements when the sale price of an asset exceeds its book value.