I’m having trouble with questions associated with synthetic cash in reading 28. Specifically, deciding which formula to use.
In the blue box on page 237, they use this formula to determine the number of futures contracts needed convert equity into cash:
[(Valuecash)(1+Rf)] / [(Pf)(multiplier)]
In EOC question 8 on page 267, they use a different formula, but the questions seem to be stated in the same way:
There’s no mention of needing to change the beta in the question. Is there some kind of phrase/keyword I should be looking for in order to determine which formula to use?