University of Phoenix Derivatives and Risk Management Essay
Description
A six month futures contract is currently priced at 1,276. The underlying stocks are valued at 1,250 and pay dividends at a continuously compounded rate of 1.70%. The current continuously compounded rate is 5%.
What is the potential arbitrage profit?
Outline the steps necessary to achieve this profit (What steps do you take today, and what steps do you take in the future).
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