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Assume we have the following information:
Spot price : 1146.00
Actual futures price : 1192.50
Theoretical futures price : 1160.00
Maturity : 3 months
a. Is the futures fairly priced?
Suppose an arbitrageur wish to take advantage of this opportunity. He has RM10,000,000.00 which he can fund at the current risk-free rate of 5%.
b. What should he do?
c. How many contracts should be shorted or bought?
d. Assume that the arbitrageur maintains this position until contract expiry at which time futures and cash prices have converged to 1165. How much profit would he makes?
slighty used goods has cash of 2150 inventory of 28470 fixed assets of 9860 accounts payable of 11900 and account
The risk free rate of return is 6%. What are the expected returns of the two factors if no arbitrage opportunities exist?
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