gtory Action Detail in 05 Assignment mheducat @ Getting Started Web Slice Galler
ID: 2786952 • Letter: G
Question
gtory Action Detail in 05 Assignment mheducat @ Getting Started Web Slice Gallery connect FINANCE gnmenit nstructions help Question 4 (of 6 166 points Problem 17-8 de dyed cer ess suppose the value o the S&P; 500 Stock index is curen y S2050 r the one year T bl rate s 55% and the expected d 500 is 5.0%. a. What shoukd the one-year matunty futures price be? (Do not round intermediate calculations.) Futures pnce b. what would the one-year maturity futures price be, if the T-bil rate s iess than th intermediate calculations.) Futures pice 9 itemsExplanation / Answer
a.
One year futures price = Spot price × (1 + risk free rate - Dividend yield)
= 2,050 × (1 + 5% - 5%)
= 2,050 × 1
= 2,050
One year futures price, if dividend yield and risk free rate is same is equal to current price that is 2,050.
b.
If risk free rate = 4%
One year futures price = Spot price × (1 + risk free rate - Dividend yield)
= 2,050 × (1 + 4% - 5%)
= 2,050 × 0.99
= 2,029.50
One year futures price, if dividend yield is more than risk free rate, is less thancurrent price that is 2,050.
One year futures price in this case is 2,029.50.