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At the end of the trading day on September 10th, 2021, the ASX 200 index closes at 7200 while the ASX 200 Index Futures with expiration on March 25, 2022, settles at 7060. The spot index pays a dividend yield of 3.5% per annum (continuously compounded) while the risk-free interest rate in Australia can be safely assumed to be zero at this time. Assuming that transactions costs are negligible and that the index multiplier is $1, which one of the following is a correct statement?

a. An arbitrageur can go long the futures, short the spot, invest the proceeds at the risk free rate and realize an arbitrage profit of $140 on September 10.

b. An arbitrageur can go long the futures, short the spot, invest the proceeds at the risk free rate and realize an arbitrage profit of $140 on March 25.

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c. An arbitrageur can go short the futures, borrow funds at the risk free rate to go long the spot and realize an arbitrage profit of $4.79 on March 25.

d. An arbitrageur can go long the futures, short the spot, invest the proceeds at the risk free rate and realize an arbitrage profit of $4.79 on September 10.

e. None of the other statements is correct.

 
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