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.

---

Definitions:

Trust

The confidence in the honesty, integrity, and reliability of a person or system.

Commons Dilemma

A situation in which individuals' short-term self-interest conflicts with long-term group interest and well-being, often related to the consumption of shared resources.

Public Goods Dilemma

A situation in which individuals must decide whether to contribute to a collective resource, even though they personally will incur a cost.

Distribution Games

Games used to study how individuals allocate resources or rewards between themselves and others.