Assume the S&P 500 is currently priced at $3015. It has a dividend yield of 1.75%...

   

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Assume the S&P 500 is currently priced at $3015. It has a dividend yield of 1.75% (on a continuously compounded basis). The risk free rate is 0.75% (on a CC basis). Where should S&P 500 futures be trading 6 months out? Assume an asset is priced at $2,000. If the risk free rate is 7.00%, storage costs for the asset are $25 payable in arrears (in one year), and the asset pays a $30 dividend in 6-months, what should a one year forward be priced at (assume annualized compounding)? A corn farmer is using corn futures to hedge his crop production. Each Corn contract is for 5,000 bushels. He expects to harvest 300,000 bushels, but is uncertain of the exact amount so only sells 40 contracts (5,000 bushels per contract). He sells June futures contracts at $6.20/bu. At harvest time in late May spot corn is priced at $6.26/bu and he buys to close his contracts at $6.26/bu. If the farmer harvests and sells 300,000 bushels of corn at the late May spot price, what is the net price per bushel he will be selling at including the impact of his hedge? Assume the S&P 500 is currently priced at $3015. It has a dividend yield of 1.75% (on a continuously compounded basis). The risk free rate is 0.75% (on a CC basis). Where should S&P 500 futures be trading 6 months out? Assume an asset is priced at $2,000. If the risk free rate is 7.00%, storage costs for the asset are $25 payable in arrears (in one year), and the asset pays a $30 dividend in 6-months, what should a one year forward be priced at (assume annualized compounding)? A corn farmer is using corn futures to hedge his crop production. Each Corn contract is for 5,000 bushels. He expects to harvest 300,000 bushels, but is uncertain of the exact amount so only sells 40 contracts (5,000 bushels per contract). He sells June futures contracts at $6.20/bu. At harvest time in late May spot corn is priced at $6.26/bu and he buys to close his contracts at $6.26/bu. If the farmer harvests and sells 300,000 bushels of corn at the late May spot price, what is the net price per bushel he will be selling at including the impact of his hedge?

Answer rating: 100% (QA)

Solution a The price of the SP 500 6 months from now based on the dividend yield and the risk free rate can be estimated using the following formula Future Price Current Price x 1 Dividend Yield Risk ... View the full answer