Calculate the dividend yield of a stock market index. Following information about European options written on the stock index: S0 = 1200, risk-free rate of interest = 5% per annum compounded continuously, market price of the call option = $88.00 and market price of the put option = $53.30. Both call and put are at-the-money options, and both expire in one year.

Required: Calculate the annual continuous compounded implied dividend yield of the stock index.

Answer rating: 100% (QA)

The dividend yield of a stock market index can be calculated using the putcall parity ... View the full answer