The Excel Application box in the chapter (available on Connect or through your course instructor) shows how
Question:
The Excel Application box in the chapter (available on Connect or through your course instructor) shows how to use the spot-futures parity relationship to find a term structure of futures prices, that is, futures prices for various maturity dates.
a. Suppose that today is January 1, 2019. Assume the interest rate is 3% per year and a stock index currently at 1,500 pays a dividend yield of 1.5%. Find the futures price for contract maturity dates of February 14, 2019; May 21, 2019; and November 18, 2019.
b. What happens to the term structure of futures prices if the dividend yield is higher than the risk-free rate? For example, what if the dividend yield is 4%?
Step by Step Answer:
Investments
ISBN: 9781259271939
9th Canadian Edition
Authors: Zvi Bodie, Alex Kane, Alan Marcus, Lorne Switzer, Maureen Stapleton, Dana Boyko, Christine Panasian