The Risk-Free Rate Is 5% and the Dividend Yield on the S&P/ASX

question 3

Multiple Choice

The risk-free rate is 5% and the dividend yield on the S&P/ASX 200 Index is 2%. Which of the following is correct when a futures option on the index is being valued? choose one)

• A) The futures price of the S&P/ASX 200 can be treated like a stock paying a dividend yield of 5%.
• B) The futures price of the S&P/ASX 200 can be treated like a stock paying a dividend yield of 2%.
• C) The futures price of the S&P/ASX 200 can be treated like a stock paying a dividend yield of 3%.
• D) The futures price of the S&P/ASX 200 can be treated like a non-dividend-paying stock.

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Definitions:

Asymmetric Information

A situation where one party in a transaction has more or superior information compared to another, often leading to an imbalance in power or unfair advantages.

Health Care Buyers

Health care buyers are individuals or entities, such as insurance companies or government agencies, that purchase health care services on behalf of consumers.

Providers

Entities or individuals that offer a certain type of service or goods to the market, typically within the context of healthcare, utilities, or telecommunications.

Well-Informed

Having access to all necessary information to make educated decisions or opinions on a particular matter.