An index is 1,200. The three-month risk-free rate is 3% per annum and the dividend yield over

Question:

An index is 1,200. The three-month risk-free rate is 3% per annum and the yield over the next three months is 1.2% per annum. The six-month risk-free rate is 3.5% per annum and the yield over the next six months is 1% per annum. Estimate the futures price of the index for three-month and six-month contracts. All interest rates and yields are continuously compounded.
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...