Consider the "SINDY Index" Obtained by Averaging Stock Prices and a Synthetic

question 9

Multiple Choice

Consider the "SINDY index" obtained by averaging stock prices and a synthetic index "SINDY spot" that replicates its performance.SINDY's current level I is 11,000 and the synthetic index's price S is $11,000.Stocks constituting SINDY spot paid $200 of dividends last year and are expected to pay the same this year.Let the continuously compounded interest rate r be 5 percent per year.If the six-month forward price on a newly written forward contract on SINDY is being quoted in the market for 11,200,then the arbitrage profit that you can make today by trading one contract as well as other securities is:

• A) 0
• B) $5
• C) $17
• D) $23
• E) None of these answers are correct.

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Definitions:

Concrete Irrationality

A notion in philosophy that suggests the presence of irrational aspects in concrete reality, challenging the predominance of rational thought in understanding existence.

René Magritte

A Belgian surrealist artist known for his thought-provoking images that challenge observers' preconditioned perceptions of reality.

Salvador Dalí

was a Spanish surrealist artist known for his eccentric and dream-like paintings, sculptures, and other creative works.

Joan Miró

A Spanish painter, sculptor, and ceramicist born in the 20th century, known for his surrealist works that blend fantasy with abstract elements.