The IF500 stock index pays no dividends. The continuously compounded risk free rate is 5%. The...

The IF500 stock index pays no dividends. The continuously compounded risk free rate is 5%. The spot price of the index is 2,016.00.

What is the 18-month forward price of the IF500 stock index?

The RP3000 stock index has a current price of 1,898.60. The two-year forward price of the index is 2,016.00. The continuously compounded risk-free rate is 5%. The stock index pays dividends continuously at a rate of δ per year.

Determine δ.

Solutions

Expert Solution

1.
Forward price=Spot price*e^(risk free rate*t)=2016*e^(5%*18/12)=2173.01444818342

2.
dividend yield=risk free rte-1/t*ln(Forward price/Spot price)
=5%-1/2*LN(2016/1898.6)=2.00%

jeff jeffy answered 1 year ago

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