It is March 2021, assume you can borrow at the risk-free rate at 0.1% p.a. continuously compounded, and the S&P/ASX 200 is trading at 6800 points, the dividend yield is 4% p.a. continuously compounded. Suppose the September ASX SPI 200 contract is trading at 6650 points. Is there an opportunity to make a riskless profit? Clearly explain your reasoning. And explain how this opportunity might be set up in general and how does this potentially impact on prices

Answer rating: 100% (QA)

To determine if there is an opportunity to make a riskless profit we need to compare the price of the September ASX SPI 200 contract to its theoretical fair value based on the riskfree rate dividends ... View the full answer