Suppose the value of the S P 500 Stock Index is currently $1,800 a If the one year T bill rate is 3 and the expected dividend yield on the S P 500 is 2 , what should the one year maturity futures price be b What if the T bill rate is less than the dividend yield, for example, 1 ...

Suppose the value of the S&P 500 Stock Index is currently $1,800. a. If the one-year T-bill

Question:

Suppose the value of the S&P 500 Stock Index is currently $1,800.
a. If the one-year T-bill rate is 3% and the expected yield on the S&P 500 is 2%, what should the one-year futures price be?
b. What if the T-bill rate is less than the yield, for example, 1%?
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...