Question
A stock index is at 755.42. A futures contract on the index expires in 57 days. The risk-free interest rate is 6.25 percent. At expiration,
A stock index is at 755.42. A futures contract on the index expires in 57 days. The risk-free interest rate is 6.25 percent. At expiration, the value of the dividends on the index is 3.94.
A. Find the appropriate futures price, using both the future value of the dividends and the present value of the dividends.
B. Find the appropriate futures price in terms of the two specifications of the dividend yield.
C. Using your answer in Part B, find the futures price under the assumption of continuous compounding of interest and dividends.
(Part B explain, Because value changes with time due to that it has impact on yield. Did divident yield can be calculated throughout the life but it is better to pick present value and base on Present value you can do other calculation.)
(Solve this question as soon as possible for assignment)
(Now everything is explained so solve it chegg experts)
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