Question: . Suppose that the risk-free interest rate is 2% per annum with continuous compounding and that the dividend yield on a stock index is 1%

. Suppose that the risk-free interest rate is 2% per annum with continuous compounding and that the dividend yield on a stock index is 1% per annum. The index is standing at 1900.

A )what is the price of three months-futures contract on the index?

B ) assume that the futures price for a contract deliverable in three months is 1925 in the market is three an arbitrage opportunity ? if yes , then state the actions you should do today to exploit any arbitrage opportunity

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