Long index strategy versus long forward strategy

Assignment Help Financial Management

You are given the following information:

Spot price of market index today = $1,500.

Forward price of nine–month forward contract on market index = $1,540.

Spot price of market index nine months from today = $1,560.

A $1,000 face value nine–month zero–coupon bond is selling for $963.39.

Find the difference, nine months from today, between the profits associated with a long index strategy versus a long forward strategy.

Are these prices consistent? Could they prevail in a well–functioning market?

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