Suppose that the current level of the Standard & Poor's Index is 500.The prospective dividend yield on S&P500 stocks is 2%,and the risk-free interest rate is 6%.What is the value of a one-year futures contract on the index? (Assume all dividend payments occur at the end of the year.)
A)530
B)520
C)540
D)560

Question

Quizplus · Accepted Answer

The futures price of the index can be calculated using the formula F = S(1+Rf-Y), where F is the futures price, S is the spot price, Rf is the risk-free interest rate, and Y is the expected dividend yield. Plugging in the given values, we get:
F = 500(1+0.06-0.02) = 500(1.04) = 520
Therefore, the value of a one-year futures contract on the index is 520.

Suppose That the Current Level of the Standard & Poor's