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The S&P portfolio pays a dividend yield of 1% annually. Its current value is 1,300. The T-bill rate is 4%. Suppose the S&P futures price for delivery in 1 year is 1,330. Construct an arbitrage strategy to exploit the mispricing and show that your pro?ts 1 year hence will equal the mispricing in the futures market.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92171842

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