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Suppose that the annual interest rate is 1% and no dividend will be declared for the...

Suppose that the annual interest rate is 1% and no dividend will be declared for the index constituent stocks in the coming quarter. The index is currently standing at 25,500.

i. Compute the index futures deliverable in exact 3 months.

ii. Suppose now the dividend yield of the index constituent stocks is 0.3% rather than 0%. Without doing any calculation, explain whether the index futures price is higher or lower than your answer in part (i).

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