Question

**The S&P 500 index is currently at $2,500. If we
assume a continuously compounding interest rate of 1% and a
continuously compounding dividend yield of 2%, what will be the
fair forward price for the index at 1-year maturity? Round to
integer.**

**The S&P 500 index is currently at $2,500. If we
assume a continuously compounding interest rate of 1% and a
continuously compounding dividend yield of 2%, what will be the
fair forward price for the index at 5-year maturity? Round to
integer.**

**The S&P 500 index is currently at $2,500. If we
assume a continuously compounding interest rate of 1% and a
continuously compounding dividend yield of 2%, what will be the
fair forward price for the index at 4-year maturity? Round to
integer.**

**The S&P 500 index is currently at $2,500. If we
assume a continuously compounding interest rate of 1% and a
continuously compounding dividend yield of 2%, what will be the
fair forward price for the index at 3-year maturity? Round to
integer.**

**The S&P 500 index is currently at $2,500. If we
assume a continuously compounding interest rate of 1% and a
continuously compounding dividend yield of 2%, what will be the
fair forward price for the index at 2-year maturity? Round to
integer.**

Answer #1

Given, current price of S&P 500 index S0 = $2500

interest rate r = 1% continuously compounded

dividend yield q = 2% continuously compounded

So, Forward price = S**0***e^((r–q )T)

For 1 year maturity, forward price = 2500*e^((0.01-0.02)*1) = $2475

For 2 year maturity, forward price = 2500*e^((0.01-0.02)*2) = $2450

For 3 year maturity, forward price = 2500*e^((0.01-0.02)*3) = $2426

For 4 year maturity, forward price = 2500*e^((0.01-0.02)*4) = $2402

For 5 year maturity, forward price = 2500*e^((0.01-0.02)*5) = $2378

The S&R index spot price is 1100, the continuously
compounded interest rate is 5%, and the dividend yield on the index
is 2%. (Round your answers to two digits after the decimal point
when rounding is necessary)
(A)What is the fair forward price for a 6-month forward?
(B)Suppose you observe a 6-month forward price of 1120, and you
decide to perform an arbitrage strategy. Illustrate the
transactions you will undertake and the amount of profit you will
make from this...

Suppose the value of the S&P 500 Stock Index is currently
$1,750. If the one-year T-bill rate is 5.3% and the expected
dividend yield on the S&P 500 is 4.6%. a. What should the
one-year maturity futures price be? (Do not round intermediate
calculations.) Futures price $ b. What would the one-year maturity
futures price be, if the T-bill rate is less than the dividend
yield, for example, 3.6%? (Do not round intermediate calculations.)
Futures price

Suppose the value of the S&P 500 Stock Index is currently
$1,750. If the one-year T-bill rate is 5.3% and the expected
dividend yield on the S&P 500 is 4.6%.
a. What should the one-year maturity futures
price be? (Do not round intermediate calculations.) calculate
Futures price $
b. What would the one-year maturity futures
price be, if the T-bill rate is less than the dividend yield, for
example, 3.6%? (Do not round intermediate calculations.)calculate
Futures price $

The risk-free rate is 5% and the dividend yield on the S&P
500 index is 2%. Which of the following is correct when a futures
option on the index is being valued?
The futures price of the S&P 500 is treated like a stock
paying a dividend yield of 5%.
The futures price of the S&P 500 is treated like a stock
paying a dividend yield of 2%.
The futures price of the S&P 500 is treated like a stock...

The current level of the S&P 500 index is 2,250. The
dividend yield on the S&P 500 is 3%. The risk-free interest
rate is 6% with continuous compounding. The futures price quote for
a contract on the S&P 500 due to expire 6 months from now
should be __________.
A)
2,774.30
B)
2,784.53
C) 2,768.63
D) 2,797.47

You have the following market data.
The S&P 500 market index currently is 94.87.
The annualized, continuously compounded dividend yield on this
index is 3.71%.
The futures contract on this index has an index multiplier of
100.
The annualized, continuously compounded risk-free rate is
3.41%.
The index futures contract that expires in 5 months has a
futures price of 80.32.
What is the total net profit if you execute the
arbitrage strategy with one futures contract?
Do not round values...

The S&R index level is 900 at t=0. The dividend yield is 3%
p.a. continuously compounded and the risk-free rate is 5%
continuously compounded.
(a) What is the theoretical forward price with a maturity of 1
year?
(b) Suppose you observe a forward price with a maturity of 1
year equal to 950. What position do you take in order to earn
arbitrage profit?
A. Long stock and short forward
B. Long stock and long forward
C. Short stock and...

The 6-month forward price of the S&P 500 Index is 1400 and
the volatility of the index is 15%. What is the price of a put
option that expires in 6 months if the strike price is 1450, risk
free rate is 5% (continuous). The dividend yield on the is 3%.

On January 1, you sell one April S&P 500 Index futures
contract at a futures price of 2,300. If the April futures price is
2,400 on February 1, your profit would be __________ if you close
your position. (The contract multiplier is 250.)
A)
$12,500 B) -$25,000 C) $25,000 D) -$12,500
The current level of the S&P 500 index is 2,350. The
dividend yield on the S&P 500 is 2%. The risk-free interest
rate is 5%with continuous compounding. The futures price quote for
a contract on...

The S&R index spot price is 1100, the continuously
compounded risk-free rate is 5%, and the continuous dividend yield
on the index is 2%.
(a) Suppose you observe a 6-month forward price of 1120. What
arbitrage would you undertake?
(b) Suppose you observe a 6-month forward price of 1110. What
arbitrage would you undertake?
*YOU MUST ANSWER WITH DETAILED WORKING!!

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