A stock index is at 755.42. A futures contract on the index expires in 57 days. The

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A stock index is at 755.42. A futures contract on the index expires in 57 days. The risk-free interest rate is 6.25 percent. At expiration, the value of the dividends on the index is 3.94.

A. Find the appropriate futures price, using both the future value of the dividends and the present value of the dividends.

B. Find the appropriate futures price in terms of the two specifications of the dividend yield.

C. Using your answer in Part B, find the futures price under the assumption of continuous compounding of interest and dividends.

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Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

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Posted Date: Feb 23, 2024 02:32 AM

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A stock index is at 755.42. A futures contract on the index expires in 57 days. The

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A Finding the appropriate futures price using both the future value and present value of dividends 1 ... View the full answer

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