Homework Answers
a)Predicated Futures Price = Spot Price*(1+interest rate)
= 450*(1+0.25%*3)
=$ 453.375 per share
b)yes, the relationship is violated
Borrow $450 and buy on share today
After 3 months, sell the share at $455
Pay off the loan 450(1.025%*3) = $453.375
Arbitrage Gain = $1.625/share
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