Given a Stock Index with a Value of $1,125, an Anticipated

question 11

Multiple Choice

Given a stock index with a value of $1,125, an anticipated dividend of $33, and a risk-free rate of 4%, what should be the value of one futures contract on the index?

• A) $1137.00
• B) $1070.00
• C) $993.40
• D) $995.09
• E) $1000.00

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Definitions:

Direct Labor

The labor costs directly associated with the production of goods or services, such as wages for workers who are involved in the manufacturing process.

Raw Material

Basic materials used in the production process, which are transformed into finished goods.

Property, Plant, and Equipment

Long-term assets, including land, buildings, machinery, and vehicles, used in the operation of a business.

Standard Cost Variances

The differences between the expected (standard) costs and the actual costs incurred for materials, labor, and overhead during a period.