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ycow [4]
3 years ago
8

"Consider the futures contract written on the S&P 500 index and maturing in one year. The interest rate is 3%, and the futur

e value of dividends expected to be paid over the next year is $35. The current index level is 2,000. Assume that you can short sell the S&P index. a. Suppose the expected rate of return on the market is 8%. What is the expected level of the index in one year? b. What is the theoretical no-arbitrage price for a 1-year futures contract on the S&P 500 stock index? c. Suppose the actual futures price is 2,012. Is there an arbitrage opportunity here? If so, how would you exploit it?"
Business
1 answer:
Alex_Xolod [135]3 years ago
3 0

Answer:

a. $2125

b. $2025

c. there is an arbitrage opportunity.

Explanation:

a. St = So x (1+ rm)-D

So = current index price = 2000

rm = return on market = 8%

D = dividends = $35

inserting into the formula:

2000x(1+0.08)-35

= $2125

b.

So x (1+rf)-D

rf = 3%

2000 x (1+0.03)-35

= $2025

c. yes there is an arbitrage opportunity. the investor should go into contract with an exercise price of 2125dollars then short sell asset in future and after this, buy back after at future market price. since actual future price is 2012 and price expected is 2125.

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Answer:

Particulars                 Amount    Amount      Amount    Amount

                                        $               $                 $                 $

Sales                           150,000   550,000     38,700      255,700

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allowances

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sold

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7 0
3 years ago
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I would give them advice :

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c. Research what people with annual incomes of less than US $1,500 really need.

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Explanation:

A disposable income is the total of cash household funds available for expenditures and investments after tax on income is accountable. The disposable income also called disposable personal income (DPI).

The figures suggest that Switzerland has almost double that of United States ($3.258) the highest taxable monthly income ($6,301).

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The correct answer would be option C, Traded up.

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When a salesperson trades something to a customer which is more expensive than the product which customer was previously intended to buy, it means that the salesperson has traded up the customer.

For example, if a salesperson persuades a customer to buy an automobile worth $20,000 rather than an automobile of worth $10000, it means, the salesperson has traded up the customer.

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According to the above situation, Miranda has learned that the future of her new company is bright as he has taken certain important steps in order to grow her business.

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5 0
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Dude why did you put this question like 5 times??
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