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Problem 1 Calculate the fair value of the following contracts with 50 trading days (t = 50/250 = 0.20 years) to expiration and a continuously
Problem 1 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%. a) An equity index futures contract with the current index level of 2,364 and a continuously compounded annual dividend yield of 2.1%. b) A foreign exchange futures contract for British pounds with the current spot price of USD1.32/GBP and a continuously compounded annual foreign risk-free rate of 2.6%. c) A U.S. Treasury bond futures contract with the market price of the cheapest-to-deliver (CTD) bond equal to 84 16/32 (84.500). The CTD bond has a coupon rate of 5.0% paid semi-annually, accrued interest today of $0.5 per $100 of face, and a delivery factor of 0.9140. Problem 1 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%. a) An equity index futures contract with the current index level of 2,364 and a continuously compounded annual dividend yield of 2.1%. b) A foreign exchange futures contract for British pounds with the current spot price of USD1.32/GBP and a continuously compounded annual foreign risk-free rate of 2.6%. c) A U.S. Treasury bond futures contract with the market price of the cheapest-to-deliver (CTD) bond equal to 84 16/32 (84.500). The CTD bond has a coupon rate of 5.0% paid semi-annually, accrued interest today of $0.5 per $100 of face, and a delivery factor of 0.9140
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