You Are Trying to Value a 3-Month Futures Contract on a Stock

question 49

Multiple Choice

You are trying to value a 3-month futures contract on a stock. The market rate of return is 11.2 percent, the risk-free rate is 3.8 percent, and the dividend yield on the stock is 2.6%. The stock is currently selling for $33 a share. What is the value of "T" as used in the formula for computing the future stock price (FT = S(1 − r) ^T) ?

• A).112
• B).250
• C).026
• D).038
• E).064

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