USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 62

Multiple Choice

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 percent, and the annualized dividend is 2 percent. You are currently considering purchasing a two-month futures contract for your portfolio.
-Refer to Exhibit 15.12. 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 these are correct.

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Definitions:

Fiduciary Fund Types

Categories of funds used by governments to account for resources for which the government acts as a trustee or fiduciary for individuals, private organizations, or other government units.

Nonexchange Transactions

Transactions where one party receives value without directly giving or promising equal value in exchange, often seen in government grants or gifts.

Derived Tax Revenues

Taxes collected by government entities that are based on activities within their jurisdiction, such as sales taxes or income taxes.

Imposed Nonexchange Revenues

Revenues collected by the government through taxes, fines, and other charges not in exchange for specific goods or services.