Question: (Concept Problem) Referring to problem 15, suppose transaction costs amounted to 0.5 percent of the value of the stock index. Explain how these costs would

(Concept Problem) Referring to problem 15, suppose transaction costs amounted to 0.5 percent of the value of the stock index. Explain how these costs would affect the profitability and the incidence of index arbitrage. Then calculate the range of possible futures prices within which no arbitrage would take place?

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