If You Determine That the DAX-30 Index Futures Is Overpriced

question 35

Multiple Choice

If you determine that the DAX-30 Index futures is overpriced relative to the spot DAX-30 Index, you could make an arbitrage profit by

• A) buying all the stocks in the DAX-30 and selling put options on the DAX-30 Index.
• B) selling short all the stocks in the DAX-30 and buying DAX-30 futures.
• C) selling all the stocks in the DAX-30 and buying call options on the DAX-30 Index.
• D) selling DAX-30 Index futures and buying all the stocks in the DAX-30.

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Definitions:

Direct Labour-hours

The total hours worked by employees directly involved in the manufacturing process.

Work in Process

Items that are in the process of being manufactured but are not yet complete.

Work in Process

Also known as work in progress, it denotes the cost of unfinished goods in manufacturing at any given time.

Direct Labour Cost

The wages paid to workers who are directly involved in the manufacturing or production process.