Question
Today is January 1 and last year's dividend on stocks in the S&P 500 index has just been paid. The yield on a 1-year strip
Today is January 1 and last year's dividend on stocks in the S&P 500 index has just been paid. The yield on a 1-year strip expressed as an EAR is 10%.The current value of the S&P 500 index is $1200. The dividend paid on the S&P 500 index is paid at the end of each year and is 4% of the index's value at the start of the year.The expected change in the value of the index over the next year is 15%.What is the forward price today for delivery of the S&P 500 index in 1 year?
- A.$1320
- B.$1368
- C.$1200
- D.$1272
- E.$1380
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Cornerstones of Financial and Managerial Accounting
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
2nd edition
978-1111879044
