If the Stock Market Index Is at a Level of 1,120

question 16

Multiple Choice

If the stock market index is at a level of 1,120 and the one-year forward on the index is 1,210,what is the implied repo rate in continuously-compounded terms (assuming zero dividends on the index) ?

• A)5.72%
• B)6.52%
• C)7.72%
• D)8.62%

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Definitions:

Aggressive Optimism

A mindset or strategy characterized by a high degree of confidence and assertiveness in action or decision-making, often in the context of investments or business growth.

Conservatism

An accounting principle that dictates reporting expenses and liabilities as soon as possible, but revenue only when it is ensured.

Top-Down Plan

A planning approach where decision making starts at the highest level of management and cascades down to lower levels.

Bottom-Up Plan

A planning approach that starts at the operational level, with detailed tasks and schedules, and integrates them into an overall strategic plan.