The Excel Application box in the chapter (available in Connect; link to Chapter 22 material) shows how
Question:
The Excel Application box in the chapter (available in Connect; link to Chapter 22 material)
shows how to use the spot-futures parity relationship to find a “term structure of futures prices,”
that is, futures prices for various maturity dates.
a. Suppose that today is January 1, 2023. Assume the interest rate is 3% per year and a stock index currently at 2,000 pays a dividend yield of 2.0%. Find the futures price for contract maturity dates of (i) February 14, 2023; (ii) May 21, 2023; and (iii) November 18, 2023.
b. What happens to the term structure of futures prices if the dividend yield is higher than the risk-free rate? For example, what if the dividend yield is 4%? P-636
Step by Step Answer:
ISE Investments
ISBN: 9781266085963
13th International Edition
Authors: Zvi Bodie, Alex Kane, Alan Marcus