The S&P/ASX200 spot contract is at 4310,and has a dividend yield of 8% p.a.The risk-free rate is 5% and the SPI futures price is currently trading at 4710.Given this information,calculate the amount by which the futures contract is mispriced according to the cost-of-carry model.

A) $ -15.01 $
B) $ 98.25 $
C) $ 144.99 $
D) $ 368.00 $

Question

The S&P/ASX200 spot contract is at 4310,and has a dividend yield of 8% p.a.The risk-free rate is 5% and the SPI futures price is currently trading at 4710.Given this information,calculate the amount by which the futures contract is mispriced according to the cost-of-carry model.

A) $ -15.01 $
B) $ 98.25 $
C) $ 144.99 $
D) $ 368.00 $

Quizplus · Accepted Answer

Using the share index futures pricing contract gives a theoretical futures price of F = 4310e^(0.08^-^0.05⁾F1F1F1S1^F1F1F10^90/365⁾ = 4342.00.Therefore,the futures contract is mispriced by 4710 - 4342.= 368.00 ,where the positive value indicates the observed futures price is higher than predicted by the model.Example 15.7,

The S&P/ASX200 Spot Contract Is at 4310,and Has a Dividend −15.01 -15.01 −15.01

The S&P/ASX200 Spot Contract Is at 4310,and Has a Dividend $-15.01$