The S&P500 index is currently valued at 2862. What should be the price (FO) on the futures contract expiring 79 DAYS from now if the S&P500 has a dividend yield of 1.70%, the rf is 2.75%, and the S&P500 has an expected return of 5.00%? Assume the risk-free rate and yields are annualized, and there are 365 DAYS per year. O2,852.85 O2,806.52 O2,839.22 O2,868.48 O 2.829.76

The S&P500 index is currently valued at 2862. What should be the price (FO) on the futures contract expiring 79 DAYS from now if the S&P500 has a dividend yield of 1.70%, the rf is 2.75%, and the S&P500 has an expected return of 5.00%? Assume the risk-free rate and yields are annualized, and there are 365 DAYS per year. O2,852.85 O2,806.52 O2,839.22 O2,868.48 O 2.829.76

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose that the current spot price of corn is $720 per bushel. The one year risk-free rate is 6% per annum. The futures price for delivery of one bushel of corn in one year’s time is $792 per bushel. Assume that net costs (storage costs minus convenience yield) are $15 per bushel (over the next one year). Is the futures contract correctly priced? If not, what is the theoretically correct price for the futures contract and how could you take advantage of any mispricing? Please show full steps and explain.
The ASX200 index is currently sitting at 6458. The risk-free interest rate is 2% per annum. Exactly three months remain before the Nov-19 SPI200 futures contract expires. The SPI200 is quoted at 6410. This futures price implies that the dividend yield on the ASX200 market index is: The futures price tells us nothing about the dividend yield 2.00% 4.98% 2.48% 0.98%
Suppose the S&P 500 index futures price is currently 950 and the initial margin is 10%. You wish to enter into 10 S&P 500 futures contracts. a. What is the notional value of your position? What is the margin? b. Suppose you earn a continuously compounded rate of 6% on your margin balance, your position is marked to market weekly, and the maintenance margin is 80% of the initial margin. What is the greatest S&P 500 index futures price 1 week from today at which you will receive a margin call?
Given the following quotes: FBM KLCI spot = 747 points, risk-free rate = 4.5% annualised, FBM KLCI dividend yield = 1.75% annualised. i) If the 90-day KLCI futures is quoted at 762 points, show that arbitrage is possible ii) Calculate the arbitrage profit if FBM KLCI is 10% higher by futures maturity.
Consider the futures contract on XYZ Inc. stock. Suppose that the annual dividend yield for the stock is 2.5% and the risk-free rate is 6.3%. Both rates are based on continuous compounding. The current futures price of the XYZ Inc. futures contract maturing in 18 months is $900 per share. Assume that the no arbitrage Futures-Spot parity when asset provides a known yield holds. What is the current spot price of XYZ Inc. per share? Please explain and show calculation. a. $934.39 b. $952.79 c. $850.13 d. $900.00 e. $944.37
Suppose the ASX200 Index is currently at 7,406, the expected dividend yield on the index is 2 percent per year, and the risk-free rate is 0.35%. Using the current price of ASX200 futures contracts that expire in six months recommend a program trading strategy for buying or selling the futures?
Consider a six-month futures contract on the FTSE 100. Assume the stocks underlying the index provide an annual dividend yield of 6.2% and the value of the index is 6754.5. Calculate the price of the index (to the nearest full index point) if the continuously compounded risk-free interest rate is (i) 6.9% and (ii) 5.
Consider these futures market data for the June delivery S&P 500 contract, exactly one year from today. The S&P 500 index is at 1,950, and the June maturity contract is at F0 = 1,951.a. If the current interest rate is 2.5%, and the average dividend rate of the stocks in the index is 1.9%, what fraction of the proceeds of stock short sales would need to be available to you to earn arbitrage profits?b. Suppose now that you in fact have access to 90% of the proceeds from a short sale. What is the lower bound on the futures price that rules out arbitrage opportunities?c. By how much does the actual futures price fall below the no-arbitrage bound?d. Formulate the appropriate arbitrage strategy, and calculate the profits to that strategy.
Consider a 6-month futures contract on a financial asset with dividend yield q=3.96% per year. Risk free rate is 10% per year. Current value of an asset is S0=$25. What should be the 6-month futures price on this asset, if there is no convenience yield and storage costs?
Suppose the 180-day futures price on crude oil is $110.00 per barrel and the volatility is 20.0%. Assume interest rates are 3.5%. What is the price of a $120 strike call futures option that expires in 180 days?
Suppose the value of the S&P 500 stock index is currently $3,700. Required: If the 1-year T-bill rate is 3% and the expected dividend yield on the S&P 500 is 1%, what should the 1-year maturity futures price be? What if the T-bill rate is less than the dividend yield, for example, 1%?
Suppose that the price of a stock today is at $25. For a strike price of K = $24 a 3-month European call option on that stock is quoted with a price of $2, and a 3-month European put option on the same stock is quoted at $1.5 Assume that the risk-free rate is 10% 3. per annum. (a) Does the put-call parity hold?

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