The S&P 500 index spot price is currently priced at 6000. Th…
The S&P 500 index spot price is currently priced at 6000. The continuously compounded risk free interest rate is 8%. You observe a 3-month forward price of 6100. Suppose the continuous dividend yield is 4%. Show that there is an arbitrage opportunity and demonstrate how you would profit from the mispricing.
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