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**Question 52** The 3-month futures contract of a certain asset is priced at $1,020. Its underlying is valued at $1,010 and pays an annual dividend rate of 1%. If the current risk-free rate is 2.75%, the arbitrage profit opportunity is closest to: | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

According to the cash-and-carry formula, the futures price should be:

$`$ 1,010 \times (1.0275 / 1.01)^{0.25} = \$1`,014.35

Hence, the futures is overvalued, indicating it should be sold and the asset be purchased for a risk-free profit of `$1`,020 - \`$1`,014.35 = \`$5.65`$. (Book 3, Module 36.1, LO 36.f)

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Question 52

The 3-month futures contract of a certain asset is priced at `$1`,020. Its underlying is valued at `$1`,010 and pays an annual dividend rate of 1%. If the current risk-free rate is 2.75%, the arbitrage profit opportunity is closest to:

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Financial Risk Manager Part 1

Get started today

Comments (0)

Get started today

Question 52 The 3-month futures contract of a certain asset is priced at $1,020. Its underlying is valued at $1,010 and pays an annual dividend rate of 1%. If the current risk-free rate is 2.75%, the arbitrage profit opportunity is closest to:

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Question 52

The 3-month futures contract of a certain asset is priced at `$1`,020. Its underlying is valued at `$1`,010 and pays an annual dividend rate of 1%. If the current risk-free rate is 2.75%, the arbitrage profit opportunity is closest to: