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

question 17

Multiple Choice

The risk-free rate is 5% and the dividend yield on the S&P 500 index is 2%.Which of the following is correct when a futures option on the index is being valued?

• A) The futures price of the S&P 500 is treated like a stock paying a dividend yield of 5%.
• B) The futures price of the S&P 500 is treated like a stock paying a dividend yield of 2%.
• C) The futures price of the S&P 500 is treated like a stock paying a dividend yield of 3%.
• D) The futures price of the S&P 500 is treated like a non-dividend-paying stock.