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An S&P 500 index linked CD matures in 3 years, with the face value the same as the current S&P 500 index price, $ 1350.
An S&P 500 index linked CD matures in 3 years, with the face value the same as the current S&P 500 index price, $ 1350. Upon its maturity, the investor will be paid back the face value, plus 80% of the gain on the S&P 500 index.The S&P 500 continuous dividendyield is 1.5% and continuously compounded risk-free rate is 6%. The S&P 500 volatility is 25%. What is the fair value of this CD?
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1290.60
1366.46
1510.22
1589.15
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