Find the futures price for contract maturity dates

Assignment Help Financial Accounting

Reference no: EM13839707

The Excel Applications box in the chapter (available at www.mhhe.com/bkm; link to Chapter 17 material) 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.

Suppose that today is January 1, 2012. Assume the interest rate is 1% per year and a stock index currently at 1,200 pays a dividend yield of 2%. Find the futures price for contract maturity dates of February 14, 2012, May 21, 2012, and November 18, 2012.
What happens to the term structure of futures prices if the dividend yield is lower than the risk-free rate? For example, what if the interest rate is 3%?

Reference no: EM13839707

Questions Cloud

Classified as a variable cost arising from physical inputs : Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella required to operate her business. Which is it?

Efficiency of monopolistic and perfectly competitive markets : Compare the efficiency of monopolistic and perfectly competitive markets. Discuss the economic factors that lead to the development of monopolies. Examples of monopolies include electric utilities, railroads, airlines, cable television, and sports le..

Calculate the amount of heat required to raise temperature : Calculate the amount of heat required to raise the temperature

Elasticity of demand for particular brand to be high or low : There are many brands of laundry detergent, all equally effective. Would you expect the elasticity of demand for any particular brand to be high or low? Explain.

Find the futures price for contract maturity dates : Suppose that today is January 1, 2012. Assume the interest rate is 1% per year and a stock index currently at 1,200 pays a dividend yield of 2%. Find the futures price for contract maturity dates of February 14, 2012, May 21, 2012, and November 18, 2..

Domestic investment and net capital outflow : Assume only two countries, China and the US. If China decides to stimulate growth through a policy of running a large export trade surplus, does China’s national saving increase? Show the relationship between China’s national savings, domestic invest..

What is the purpose of the charter : What is the purpose of the charter? Discuss the advantage that you will have as you work on developing your own charter

Provide the statement of work and work breakdown structure : Draft the Project Charter for your term project. In addition, provide the Statement of Work (SOW), and the Work Breakdown Structure (WBS) and the Responsibility Assignment Matrix (RAM) for a selected project task

What is the percentage return on the investors position : If Brandex stock now sells at $120 per share, what should the futures price be? If the Brandex stock price drops by 3%, what will be the change in the futures price and the change in the investor’s margin account? If the margin on the contract is $12..

User Account

All Pages