Consider the futures contract written on the S&P 500 index and maturing in one year. The...

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Consider the futures contract written on the S&P 500 index and maturing in one year. The interest rate is 3.7%, and the future value of dividends expected to be paid over the next year is $85. The current index level is 5,000. Assume that you can short sell the S&P index. Required: a. Suppose the expected rate of return on the market is 7.4%. What is the expected level of the index in one year? b. What is the theoretical no-arbitrage price for a 1-year futures contract on the S&P 500 stock index? c. Suppose the actual futures price is 5,064. Is there an arbitrage opportunity here? a. Expected level of the index b. Price c. Is there an arbitrage opportunity here? Consider the futures contract written on the S&P 500 index and maturing in one year. The interest rate is 3.7%, and the future value of dividends expected to be paid over the next year is $85. The current index level is 5,000. Assume that you can short sell the S&P index. Required: a. Suppose the expected rate of return on the market is 7.4%. What is the expected level of the index in one year? b. What is the theoretical no-arbitrage price for a 1-year futures contract on the S&P 500 stock index? c. Suppose the actual futures price is 5,064. Is there an arbitrage opportunity here? a. Expected level of the index b. Price c. Is there an arbitrage opportunity here?