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American based asset management company

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Reference no: EM133072647

You work as a Certified Financial Planner at an American Based Asset Management Company. Aside from managing stock portfolios, the company also does proprietary trading. You now notice the following quotations on your screen:

S&P 500 Index
3-month SIF
Rf rate
Dividend yield
Index multiplier

= 850 points
= 846.64 points (maturing 90 days)
= 4%
= 1.75% (annualized)
= $100

Required:

a. Proof that arbitrage is possible.

b. Assuming the index rise and fall by 20%. Determine the arbitrage profit if the S&P 500 3-month futures price today is quoted at 875 points.

c. To what extent is your arbitrage profit dependent on the S&P 500 index's performance?

Reference no: EM133072647

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