S&P 500 INDEX MINI (CME)-$50 times index

Sept 1671.75 1680.50 1665.75 1675.50 +4.50 2,773,691

Dec 1665.25 1674.00 1659.75 1669.25 +4.50 26,771

Mar 14 1659.25 1667.25 1653.50 1662.75 +4.50 2,039

Jun 1656.75 1656.75 1648.75 1656.00 +4.50 220

Sep 1649.50 1649.00 +4.50 1

Est vol 1,421,504; open int, 2,797,695, +13,614.

Index: Hi 1684.75; Lo 1677.91; Close 1680.91, +4.65.

Consider the S&P 500 futures prices on p. 3. Find the settlement price for the Sept 2013 futures contract. Find the closing S&P 500 index level (its on the last line of the panel of S&P 500 futures prices). Notice that these prices were observed on July 17, 2013 (see top of p. 3). The contract specifications on p. 4 indicate that the Sept 2013 futures contract expires on Sept 20. Compute the number of days to expiration; you can do this in Excel by subtracting 7/17/2013 from 9/20/2013. Find the three-month LIBOR on p. 5; lets use that for the riskless interest rate because the term of the futures contract is closer to three months than to one month or six months. Now you are ready to apply the cost of carry model for stock index futures:

F₀ = S₀e^(ry)T

where r and y are the continuously compounded riskless interest rate and dividend yield.

a. Assume that the index dividend yield is 2.5%. What should be the Sept 2013 futures price?