The one-year futures price on a particular stock-index portfolio is 4,480, the stock index currently is 4,400, the one-year risk-free interest rate is 3%, and the year-end dividend that will be paid on a $4,400 investment in the index portfolio is $44. Required: By how much is the contract mispriced? Note: Input the amount as a positive value. Use the dropdown to indicate whether the contract is above or below its parity value. × Answer is complete but not entirely correct. The futures price is S 9 × below its "proper" or parity value.
The one-year futures price on a particular stock-index portfolio is 4,480, the stock index currently is 4,400, the one-year risk-free interest rate is 3%, and the year-end dividend that will be paid on a $4,400 investment in the index portfolio is $44. Required: By how much is the contract mispriced? Note: Input the amount as a positive value. Use the dropdown to indicate whether the contract is above or below its parity value. × Answer is complete but not entirely correct. The futures price is S 9 × below its "proper" or parity value.
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
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Transcribed Image Text:The one-year futures price on a particular stock-index portfolio is 4,480, the stock index currently is 4,400, the one-year risk-free
interest rate is 3%, and the year-end dividend that will be paid on a $4,400 investment in the index portfolio is $44.
Required:
By how much is the contract mispriced?
Note: Input the amount as a positive value. Use the dropdown to indicate whether the contract is above or below its parity value.
× Answer is complete but not entirely correct.
The futures price is
S
9 × below
its "proper" or parity
value.
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