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

question 31

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 percent.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 (F_T = S(1 - r) ^T) ?

• A) 0.112
• B) 0.250
• C) 0.026
• D) 0.038
• E) 0.064