Suppose That the Current Level of the Standard & Poor's

question 32

Multiple Choice

Suppose that the current level of the Standard & Poor's Index is 500.The prospective dividend yield on S&P500 stocks is 2%,and the risk-free interest rate is 6%.What is the value of a one-year futures contract on the index? (Assume all dividend payments occur at the end of the year.)

• A)530
• B)520
• C)540
• D)560

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Definitions:

Merchandising Company

A type of business that purchases goods in a finished condition for resale without further processing.

Sells Directly

A method where companies sell their products or services directly to consumers without involving intermediaries, aiming to enhance customer relationships and control the sales process.

Retailer

A business or person that sells goods directly to consumers for their use or consumption, rather than to other businesses or wholesalers.

Perpetual Inventory Systems

This approach to inventory accounting instantly captures sales or purchases of inventory through computerized point-of-sale systems and software for enterprise asset management.