What is the cost-of-carry on this futures contract on January 3?

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
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D & R A1 3 - 2

Question 3. Stock Futures with Dividends

Today is January 3. Your friend David has just bought a futures contract on a stock index, and the contract specifies one year to expiration. The current share price is $80, and the annually compounded interest rate is 10%. The stock will pay quarterly dividends of $2 during the next year, with dividends payments on the following dates:

  • January 25
  • April 25
  • July 25
  • October 25

Assume that this is a non-leap year.

  1. What is the cost-of-carry on this futures contract on January 3?
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