December futures on the S&P 500 index trade at 250 times the index value of 3883.75. The S&P 500 index spot value is 3901.35 with an annualised dividend yield of 1.69% and the annualised risk-free rate is 3.08%. 

Calculate the parity value of the futures contract if there are 3-months until the December contract expires. In addition, determine if the contract is under or overvalued as well as the approximate arbitrage profit per contract.

Answer rating: 100% (QA)

To calculate the parity value of the futures contract you can use the costofcarry model The costofca... View the full answer