Question

The S&P 500 stock index is at 1300. The annualized interest rate is 4.0 percent, and the annualized dividend is 2 percent. You are currently considering purchasing a two-month futures contract for your portfolio Refer to Exhibit 15.12. Calculate the current price of the futures contract.

Answer 1

Answer: $1,304.30

Explanation:

Current price can be calculated by the formula:

= 1,300 * ( 1 + (4% - 2%)) ^ 2/12 months

= 1,300 * 1.0033058903246372019414946658385

= $1,304.29

= $1,304.30