Suppose we are given a $360 spot index facing a݊ ܴ௙= 10%p.a. and a dividend yield of 6% p.a. It is also given that the actual index price = $366 with a delivery date of 3 months from today. a)...

Suppose we are given a $360 spot index facing a݊ ܴ௙= 10%p.a. and a dividend yield of 6% p.a. It is also given that the actual index price = $366 with a delivery date of 3 months from today.

a) Calculate the fair value of the index futures contract using the stock index method;

b) Determine if an opportunity for arbitrage profit exists on the markets;

c) Suppose our line of credit is $24million and the contract size is $200 per index portfolio, show the cash flows of the index transactions today and at the delivery date if the spot index works out to be $320 or $400.