Sign up  |  Log in

Creating Equity out of Cash

  1. Long stock + Short Futures= Long risk free bond.

​​​​​​​​​​​The left hand side long stock and short futures cancel each other out and end up at break even position. Then, how come it yields return close to risk free bond?

Also the concept of creating equity out of cash is not clear to me..

With exam day right around the corner, Schweser's Final Review products are designed to help you finish out your study plan and walk into the testing center feeling prepared and confident.

Futures is based on risk free rate. The left sude dies not cancel out.

F = S0(1+Rf)t

125mph wrote:
The left sude dies not cancel out.

Someone needs to type more slowly.

wink

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/