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Suppose That the Current Level of the Standard and Poor's

question 51

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Suppose that the current level of the Standard and Poor's Index is 950. The prospective dividend yield on S&P 500 stocks is 3 percent, and the risk-free interest rate is 5 percent. What is the value of a one-year futures contract on the index? (Assume all dividend payments occur at the end of the year.)

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A contract in which there is an exchange of promises: both parties assume an obligation.

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