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26 January, 21:12

A stock index currently stands at 500. The risk-free interest rate is 5% per annum (with continuous compounding) and the dividend yield on the index is 3.5% per annum. What should the futures price for a three-month contract be?

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  1. 26 January, 21:21
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    The answer is $502.48

    Explanation:

    The futures price = So e ^ (r-q) t/365

    The futures price = 500e ^ (0.05-0.035) 0.33 = $502.48
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