If the Stock Index Is at 148,the Three-Month Futures Price

question 15

Multiple Choice

If the stock index is at 148,the three-month futures price is 151,the dividend yield is 5 percent and the interest rate is 8 percent,determine the profit from an index arbitrage if the stock ends up at 144 at expiration.(Ignore transaction costs. )

• A)1.89
• B)4.00
• C)7.00
• D)5.11
• E)-7.00

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