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A portfolio manager expects to purchase a portfolio of stocks in 60 days. In order to...

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Basic Math

A portfolio manager expects to purchase a portfolio of stocks in60 days. In order to hedge against a potential price increase overthe next 60 days, she decides to take a long position on a 60-dayforward contract on the S&P 500 stock index. The index iscurrently at 1150. The continuously compounded dividend yield is1.85 percent. The discrete risk-free rate is 4.35 percent.Calculate the no-arbitrage forward price on this contract.

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SOLUTIONFrom given dataA portfoliomanager expects to purchase a portfolio of stocks in 60 days Inorder to hedge against a    See Answer
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