Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Real Estate Finance

Authors: Doris Barrell

15th Edition

1475462077, 978-1475462074

More Books

Students also viewed these Finance questions

Question

8. List some motivations for terminating relationships.

Answered: 1 week ago

Question

Determine the amplitude and period of each function.

Answered: 1 week ago