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What should be the theoretical futures price for the stock

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Reference no: EM132403288

Suppose that the risk-free interest rate is 8% per annum with continuous compounding and that the dividend yield on a stock index is 3% per annum with continuous compounding. The index is standing at 350 and the futures price for a contract deliverable in 6 months is 360.

1) What should be the theoretical futures price for the stock index?

2) What arbitrage opportunities does this create?

Reference no: EM132403288

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