A Index has currently a value of $10,000, and pays a dividend yield of 3%. What should be the price of a futures contract on the index for delivery in 1 year and what for delivery in 2 years? Futures Prices = Spot price* (1+r-d) (r= interest rate, d= dividend yield) One year futures price: F=10000*(1+.09-.03)= $10600 Two year futures price: F= 10000* (1+.09-.03)^2= $11236 After performing the calculations we determined that a fair futures price for an index with a PV of $10,000 and a dividend yield of 3% and a delivery date of one year is worth $10,600, and the fair price for a two year delivery is worth $11,236 FUTURES PRICES

A Index has currently a value of $10,000, and pays a dividend yield of 3%. What should be the price of a futures contract on the index for delivery in 1 year and what for delivery in 2 years? Futures Prices = Spot price* (1+r-d) (r= interest rate, d= dividend yield) One year futures price: F=10000(1+.09-.03)= $10600 Two year futures price: F= 10000 (1+.09-.03)^2= $11236 After performing the calculations we determined that a fair futures price for an index with a PV of $10,000 and a dividend yield of 3% and a delivery date of one year is worth $10,600, and the fair price for a two year delivery is worth $11,236 FUTURES PRICES

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The S&P500 index is currently valued at 2862. What should be the price (FO) on the futures contract expiring 79 DAYS from now if the S&P500 has a dividend yield of 1.70%, the rf is 2.75%, and the S&P500 has an expected return of 5.00%? Assume the risk-free rate and yields are annualized, and there are 365 DAYS per year. O 2,852.85 O2,806.52 O2,839.22 O2,868.48 O 2,829.76.
make sure there is no eroor when giving me the answers please ASAP A Index has currently a value of $10,000, and pays a dividend yield of 3%. What should be the price of a futures contract on the index for delivery in 1 year and what for delivery in 2 years? Assume that the interest rates for 2 years out are flat at 9%. If the one-year futures is trading in the market for $9,500 what will you do? 2) show in a diagram or graph or illustration of how the abritrage opprotunity happens.
Suppose the S&P 500 index futures price is currently 950 and the initial margin is 10%. You wish to enter into 10 S&P 500 futures contracts. a. What is the notional value of your position? What is the margin? b. Suppose you earn a continuously compounded rate of 6% on your margin balance, your position is marked to market weekly, and the maintenance margin is 80% of the initial margin. What is the greatest S&P 500 index futures price 1 week from today at which you will receive a margin call?
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