Question

In: Finance

Suppose the value of the S&P 500 Stock Index is currently $2,050. If the one-year T-bill...

Suppose the value of the S&P 500 Stock Index is currently $2,050. If the one-year T-bill rate is 5.5% and the expected dividend yield on the S&P 500 is 5.0%.

a. What should the one-year maturity futures price be? (Do not round intermediate calculations.)

Futures price            $

b. What would the one-year maturity futures price be, if the T-bill rate is less than the dividend yield, for example, 4.0%? (Do not round intermediate calculations.)

Futures price   

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 8 months ago
Next > < Previous

Related Solutions

Suppose the value of the S&P 500 Stock Index is currently $3,350. a. If the one-year...
Suppose the value of the S&P 500 Stock Index is currently $3,350. a. If the one-year T-bill rate is 4.6% and the expected dividend yield on the S&P 500 is 4.2%, what should the one-year maturity futures price be? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What would the one-year maturity futures price be, if the T-bill rate is less than the dividend yield, for example, 3.2%? (Do not round intermediate calculations. Round your...
The S&P 500, or simply the S&P, is a stock market index that measures the stock...
The S&P 500, or simply the S&P, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. define an adequate investment strategy, and select the assets they would invest to start with. -the potential customer profile specifications (SAP 500), -the portfolio objectives -the investment policies (strategic allocation) -The choice and justification of a benchmark -a trial portfolio based on the team investment guidelines -a brief evaluation on each...
The S&P 500 index is currently at $2,000. The one-year $1,900-strike European call option on the...
The S&P 500 index is currently at $2,000. The one-year $1,900-strike European call option on the index is quoted at $191. The one-year $1,900-strike European put option on the index is quoted at $58. (a) If you are long a 1-year forward on the index with a delivery price of $1,900, what should be the current value of your forward position?
The S&P 500 index is currently at $2,000. The one-year $1,900-strike European call option on the...
The S&P 500 index is currently at $2,000. The one-year $1,900-strike European call option on the index is quoted at $191. The one-year $1,900-strike European put option on the index is quoted at $58 What is the current intrinsic value ( ) and time value ( ) for the call option? What is the current intrinsic value ( ) and time value ( ) for the put option?
Consider a three month futures contract on the S&P 500 index. The value of the index...
Consider a three month futures contract on the S&P 500 index. The value of the index is 1000; the dividend yield is 1% and the three month interest rate is 4% continuously compounded. (a) Explain how to compute the futures price making sure to define all terms and assumptions. In particular carefully explain why the formula holds. Then compute the fair futures price. (b) Suppose the actual futures price is 1010.0. In great detail describe a strategy that creates guaranteed...
You are contemplating investments in the stock of Clorox and in the S&P 500 index (a...
You are contemplating investments in the stock of Clorox and in the S&P 500 index (a collection of stocks approximately representing the overall market). The Clorox required return (calculated using the capital asset pricing model or CAPM) is 18%, the Clorox beta is .95, and its bonds are rated A. The standard deviation of returns for Clorox stock is 14%. Its payout ratio is 65% and its sales are expected to grow by 7% during the next year. The S&P...
Which of the following are examples of market value indexes? I. S&P 500 stock index II....
Which of the following are examples of market value indexes? I. S&P 500 stock index II. Dow Jones Industrial Index III. NASDAQ index IV. Wilshire 5000 Index A. I B. II C. I and III D. I, III, and IV
"The 2-year S&P 500 index futures price is currently at $3425. If you are long 4...
"The 2-year S&P 500 index futures price is currently at $3425. If you are long 4 contracts of the S&P 500 index future contracts with 2-year maturity and with a delivery price of $3000, what's the value of your futures position. The continuously compounding interest rate on dollar is 1%. Each contract is 100 shares. Round to integer. "
Currently the level of the S&P 500 Index is 1300, and the yield on the 90-day...
Currently the level of the S&P 500 Index is 1300, and the yield on the 90-day treasury bill is 2.75%. The following table lists the forecasts of an economist for the S&P 500 in the coming year. Economic Environment Probability of Occurance Expected return of the S&P Above Average 30% 22% Average 45% 8% Poor 25% -35% Calculate the expected return and standard deviation for the S&P 500. Construct the Security Market Line graph (from your findings) and show what...
Suppose you invest $15,000 in an S&P 500 Index fund (S&P fund) and $10,000 in a...
Suppose you invest $15,000 in an S&P 500 Index fund (S&P fund) and $10,000 in a total bond market fund (Bond fund). The expected returns of the S&P and Bond funds are 8% and 4%, respectively. The standard deviations of the S&P and Bond funds are 18% and 7% respectively. The correlation between the two funds is 0.40. The risk-free rate is 2%. What is the expected return on your portfolio? What is the standard deviation on your portfolio? What...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT