Homework Answers
Solution :-
(a).
Current interest rate = 6%
June futures = $1,648.70
December futures = $1,654
Period between June and December = 6month.
Annual interest rate is 6%, So 6 month interest rate is 3%
December future using Parity relationship is calculated below:
December futures = June futures × (1+0.03)
= $1,648.70 × 1.03
= $1,698.16
Hence, December future according Parity relationship will be $1,698.16
(b).
Yes Arbitrage opportunity exist because of difference between December future price as per parity relationshp and Actual December futures price
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