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What is the theoretical 3-month futures price

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Reference no: EM132466180

Problem: The S&P 500 spot is 2,271.31 and it is expected to pay a dividend yield of 3%. The risk-free rate is 4% per annum continuously compounded. Each contract is on $250 times the futures price.

Required:

Question 1: What is the theoretical 3-month futures price?

Question 2: The 3-month futures price is 2,300. Is there an arbritrage? If so, show how we can benefit from it? Show all details.

Reference no: EM132466180

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