Short sell the stocks in the market index

Assignment Help Financial Management

Reference no: EM131868198

1 years futures pricew on a stock index = 1825, stock index is currently 1800. 1yr risk free = 3%. year end dividend paid on the 1800 investment = $25.

Assuming you short sell the stocks in the market index, the proceeds of the short sale are kept with the broker and you do not recieve any interest income on the funds. is there still an arbitrage opportunity (assuming you dont already own the shares in the index)? explain

Also, given a stock index of 1800, how high and low can the futures price be without giving rise to arbitrage opportunities?

Reference no: EM131868198

Questions Cloud

The variance and standard deviation of the IRRs : An investor has projected three possible scenarios for a project as follows: The variance and standard deviation of the IRRs

What is yearly interest rate being offered by the dealer : What is the yearly interest rate being offered by the dealer? (to the? customer)?

Hedging instrument that the investor has to sell : What is the quantity f of the hedging instrument that the investor has to sell? We suppose that the YTM curve increases instantaneously by 0.1%.

Behind saving at the beginning of the current month : How will his results change is he behind saving at the beginning of the current month?

Short sell the stocks in the market index : Assuming you short sell the stocks in the market index, how high and low can the futures price be without giving rise to arbitrage opportunities?

Cost of borrowing on this investment : what should the University charge per ticket to recover at least 6% cost of borrowing on this investment?

Calculate the price of bonds at each of years to maturity : Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, calculate the price of bonds at each of the following years to maturity.

The year to maturity on the saleemi bonds : The Saleemi corporation's $1000 bonds pay 9% interest annually and have 13 years until maturity. The year to maturity on the Saleemi bonds is_

What stock price will you get margin call : You post the 50% margin required on the short sale. If your broker requires a 30% maintenance margin, at what stock price will you get a margin call?

User Account

All Pages