Question: Please make sure to show ALL your work and double check your answer to make sure it is correct. Thank you! 16. The S&P portfolio

Please make sure to show ALL your work and double check your

Please make sure to show ALL your work and double check your answer to make sure it is correct. Thank you!

16. The S\&P portfolio pays a dividend yield of 1% annually. Its current value is 2,000 . The T-bill rate is 4%. Suppose the S\&P futures price for delivery in 1 year is 2,050 . Construct an arbitrage strategy to exploit the mispricing and show that your profits 1 year hence will equal the mispricing in the futures market

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