What is the value of the arbitrage profit per contract

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Reference no: EM131519267

The current value of the P&S 347 index is 2300 points while the price of a P&S futures contract for delivery in six months is $60,000. The risk-free interest rate is 10% per year and the future value of the dividends paid out to one share of the P&S index is $2500. The contract multiplier is $25, which means that for the purposes of this futures contract each index point is worth that much. No need to compound interest.

(a) What is the value of the arbitrage profit per contract that can be made here?

(b) If the cost of short-selling shares corresponding to one P&S index future is $3000, what is the value of the arbitrage profit per contract?

Reference no: EM131519267

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