The S&P/TSX 60 index stands at 764.89. Dividend yield on the index is 2.75%, and the T-bill
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Question:
The S&P/TSX 60 index stands at 764.89. Dividend yield on the index is 2.75%, and the T-bill yield is 5.85%.
a.Determine the appropriate formula to price S&P/TSX 60 index price. Outline any assumptions invoked to arrive at your pricing formula.
b.What is the theoretical price of S&P/TSX 60 index futures contract for delivery
in 106 days?
c.If you observe in the market that the S&P/TSX index futures with delivery in
106 days is priced at 772.81, how could an arbitrageur take advantage of this
information?
d. What is the implied dividend yield if the T-bill rate is 5.85%?
Expert Answer:
SPTSX 60 Index Pricing and Arbitrage a Pricing Formula and Assumptions There are two main approaches to pricing the SPTSX 60 index 1 Present Value of ... View the full answer
Related Book For 
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
