### CFA Practice Question

There are 206 practice questions for this study session.

### CFA Practice Question

The spot price is \$72. The life of a futures contract is 233 days, and the interest rate is 7.5%. If the future is selling for \$75.4019, what should an arbitrageur do to net a riskless, positive return?
A. Buy the asset for \$72 and sell the futures for \$75.4019.
B. Sell the asset for \$72 and buy the futures for \$75.4019.
C. There is no arbitrage opportunity in this case.
Explanation: F0(T) = S0(1 + r)T = 72 (1.075) 233/365 = \$75.4019. As the price of the futures contract is what it should be, there is no arbitrage opportunity at all.

### User Contributed Comments5

User Comment
siggy25 The question assumes there are no cash flows to consider (dividends / coupons / costs to store, ect). I selected (c) as this was not explicitly stated
volkovv If no additional info is given, assume it doesn't exist. There was enough information to come up with an answer. But I agree in a real world you definitely need dividends / coupons, etc. to make an inteligent judgement.
Dieckmann if you are using a the Texas Inst. BA II plus calculator make sure you check all the significant figures
ArtieCFA Make sure you use 365 days instead of 360.
Ngana Why wasn't the interest divided by 365