The price of ACC stock on 31 December 2022 was 220and the Futures price on the same stock on the same date, i.e., 31 December 2022 for March 2023…

Based on the above information, the futures price for ACC stock on 31 December 2022 should be: Spot price + Interest Portion – Dividend = 220 + (220 x 0.15 x 0.25) – (0.25 x 10) = 225.75 Thus, as per the 'cost of carry' criteria, the Futures price is 225.75, which is more than the actual price of 222on 31 March 2023. This would give rise to earn riskless arbitrage opportunity of 3.75 i.e. (225.75 – 222) Advise to the Arbitrager. 1. Short sell one unit of stock at spot price for 220. 2. Deposit 220at 15% p.a. for 3 months. 3. Buy a 3-month Futures contract for one unit of stock of ACC at 222. After 3 months 1. Take money out of the Bank. 2. Take delivery by paying 222and return the unit of stock to the party whom short sell was made along. 3. Pay the Dividend amount to the buyer whom short sell was made. Total Inflow = 220 + (220 x 0.15 x 0.25) = 228.25 Total Outflow = 222 + 2.50 = 224.50 Net Gain to the Arbitrager = Total Inflow - Total Outflow = 228.25 -224.50 = 3.75 Thus, the arbitrager earns - 3.75 per share without involving any risk.