You are furnished with the following information: FBM KLCI spot = 1,670 Risk free rate = 4.5%

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You are furnished with the following information:

FBM KLCI spot = 1,670

Risk free rate = 4.5% annualized

FBM KLCI dividend yield = 1.5% annualized

(a) If the 90-day FBM KLCI futures contract is priced at 1,675 points, show that arbitrage is possible.

(b) Outline the arbitrage strategy and calculate the profit derived if the FBM KLCI is 20% lower at futures maturity. Clearly show all computations.

Related Book For answer-question

Introduction to Mathematical Statistics and Its Applications

ISBN: 978-0321693945

5th edition

Authors: Richard J. Larsen, Morris L. Marx

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Posted Date: Jan 10, 2021 08:51 PM

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You are furnished with the following information: FBM KLCI spot = 1,670 Risk free rate = 4.5%

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Answer in image Answer i Part F3 So 18 1 312 1670 10045 00175 ... View the full answer

Introduction to Mathematical Statistics and Its Applications

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