A Riskless Stock Index Arbitrage Profit Is Possible If the Following

question 41

True/False

A riskless stock index arbitrage profit is possible if the following condition holds: F_0,T = S₀(1 + r_f - d)^T, where spot price now is S₀, value now of a futures contract expiring at time T is (F_0,T), r_f is the risk free rate, and d is the dividend.

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Definitions:

Rolls Forward

A process in accounting or financial planning where data or balances are brought forward from a previous period to the current one.

Manufacturing Overhead Budget

A detailed plan showing the production costs, other than direct materials and direct labor, that will be incurred over a specified time period.

Non-cash Charges

Expenses reported on the income statement that do not involve a direct cash outflow, such as depreciation or amortization.

Direct Materials Budget

A financial plan that estimates the cost of raw materials required for production.