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Calculate the fair value of the following contracts with 50 trading days (t = 50/250 = 0.20 years) to expiration and a continuously compounded annual
Calculate the fair value of the following contracts with 50 trading days (t = 50/250 = 0.20 years) to expiration and a continuously compounded annual risk-free rate of 1.5%.
- An equity index futures contract with the current index level of 2,364 and a continuously compounded annual dividend yield of 2.1%.
= 2364*e^-.0012
= 2361.1632
B) Calculate the implied annual risk-free rate if the actual market price of the equity futures contract in Problem 1a is 2,376. How would an investor construct a portfolio to earn this rate of return?
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