Suppose That the Current Level of the S&P 500 Index

question 22

Multiple Choice

Suppose that the current level of the S&P 500 Index is 1100.The prospective dividend yield is 3%,and the current risk-free interest rate is 7%.What is the value of a one-year futures contract on the index? (Assume all dividends are paid at the end of the year.)

• A)1056
• B)1144
• C)1210
• D)995

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Definitions:

Smoker

An individual who consumes tobacco products through the act of smoking.

Direct Cross-Subsidies

Pricing a product or service above its market value to pay for the loss of giving away a product or service for free or below its market value.

Market Value

The current price at which an asset or company can be bought or sold in the marketplace.

Product

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