ZuoTi.Pro
Question

Suppose that the current value of the S&P 500 stock index is USD 3000. Assume that...

Suppose that the current value of the S&P 500 stock index is USD 3000. Assume that the rates of interest in USD and Euro are respectively 3% and 1% per year with continuous compounding, and that the S&P 500 index pays a continuous dividend rate of 2% per year. Finally, the spot exchange rate is USD 1.1 per Euro.

• Compute the forward price of the S&P 500 in USD for delivery in one year.

• Compute the forward price (exchange rate) of USD in Euro for delivery in one year.

• Compute the forward price of the S&P 500 in Euro for delivery in one year.

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer a) Forward price of  the S&P 500 in USD = S*ert = 3000* e0.03*1 = $ 3091.42

Answer b) Forward price (exchange rate) of USD in Euro = S *(1 + Id) / (1 + Ie)

F= 1.1*(1.03/1.01) = 1.1218.

Answer c) Forward price of  the S&P 500 in Euro = $ 3091.42 / 1.1218= Euro 2755.813

0 0
Add a comment
Know the answer?
Add Answer to:
Suppose that the current value of the S&P 500 stock index is USD 3000. Assume that...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 5. Suppose that the current value of the S&P 500 stock index is USD 2600. Assume that the per ann...

    5. Suppose that the current value of the S&P 500 stock index is USD 2600. Assume that the per annum rates of interest in USD and GBP(British Pound) are respectively 3% and 2% on a continuously compounded basis, and that the S&P 500 index pays a continuous dividend rate of 2% per annum. Finally, the spot exchange rate is USD1.3 per GBP. a) Compute the forward price of the S&P 500 in USD for delivery in one year. for delivery...

  • Suppose that the exchange rate (spot price) of Euro in GBP (British Pound) is GBP 0.95. &nbs...

    Suppose that the exchange rate (spot price) of Euro in GBP (British Pound) is GBP 0.95.   In addition, assume that you can freely borrow and lend in GBP for any maturity at a rate of 2% per annum and that you can do the same in Euro at a rate of 1% per annum. Both rates are continuously compounded rates. Given these assumptions: Compute the forward price (exchange rate) of the GBP in Euro for delivery of the GBP in...

  • Suppose the value of the S&P 500 stock index is currently 1,000. 1-a. If the 1-year...

    Suppose the value of the S&P 500 stock index is currently 1,000. 1-a. If the 1-year T-bill rate is 7% and the expected dividend yield on the S&P 500 is 6%, what should the 1-year maturity futures price be?   Futures price $ 1-b. What if the T-bill rate is less than the dividend yield, for example, 1%? If the t-bill rate is less than the dividend yield, then the futures price should be: a.)less than the spot price b.) more...

  • Suppose the value of the S&P 500 Stock Index is currently $3,250. a. If the one-year...

    Suppose the value of the S&P 500 Stock Index is currently $3,250. a. If the one-year T-bill rate is 5.5% and the expected dividend yield on the S&P 500 is 5.0%, what should the one-year maturity futures price be? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What would the one-year maturity futures price be, if the T-bill rate is less than the dividend yield, for example, 4.0%? (Do not round intermediate calculations. Round your...

  • Suppose the value of the S&P 500 stock index is currently 2,000. a. If the 1-year...

    Suppose the value of the S&P 500 stock index is currently 2,000. a. If the 1-year T-bill rate is 3% and the expected dividend yield on the S&P 500 is 1%, what should the 1-year maturity futures price be? Futures price b. What if the T-bill rate is less than the dividend yield, for example, 1%? The T-bill rate is less than the dividend yield, then the futures price should be (Click to select)

  • Suppose the value of the S&P 500 stock index is currently 900. a. If the 1-year...

    Suppose the value of the S&P 500 stock index is currently 900. a. If the 1-year T-bill rate is 5% and the expected dividend yield on the S&P 500 is 3%, what should the 1-year maturity futures price be? Futures price b. What if the T-bill rate is less than the dividend yield, for example, 1%? The T-bill rate is less than the dividend yield, then the futures price should be (Click to select))

  • Check my work 17 Suppose the value of the S&P 500 Stock Index is currently $2,550....

    Check my work 17 Suppose the value of the S&P 500 Stock Index is currently $2,550. 1.15 points a. If the one-year T-bill rate is 3.1% and the expected dividend yield on the S&P 500 is 2.2%, what should the one-year maturity futures price be? (Do not round intermediate calculations. Round your answer to 2 decimal places.) 8 03:50:06 Futures priceſ Skipped eBook b. What would the one-year maturity futures price be, if the T-bill rate is less than the...

  • (5 points) The value of S&P 500 is currently 2800. The risk-free interest rate is 2.7% per year w...

    (5 points) The value of S&P 500 is currently 2800. The risk-free interest rate is 2.7% per year with continuous compounding. The dividend yield of S&P 500 is 1.92% per year. The volatility of S&P 500 is 21%. Compute the prices of 6-month at-the-money European call and put options in the Black-Scholes-Merton model. (Keep 6 digits after the decimal point in your calculations) I. (5 points) The value of S&P 500 is currently 2800. The risk-free interest rate is 2.7%...

  • Suppose your broker give you the following information: Spot exchange rate (USD/EUR) = 1.1370 One year...

    Suppose your broker give you the following information: Spot exchange rate (USD/EUR) = 1.1370 One year forward rate (USD/EUR) = 1.1405 One year USD interest rate = 0.87% One year Euro interest rate = 0.65% a. Is there any violation of interest rate parity? b. How would you take advantage of any arbitrage situation? c. What is your profit? d. Suggest an equilibrium value for the forward rate

  • BEGINNING OF TERM END OF TERM a. Stock market index information: S&P 500 (stock) index level...

    BEGINNING OF TERM END OF TERM a. Stock market index information: S&P 500 (stock) index level Nasdaq Composite (stock) index level: b. Interest rate information: Prime rate: Federal funds rate: Commercial paper rate (90 days): Certificate of deposit rate (3-month) Treasury bill rate (13 weeks): Treasury bill rate (26 weeks): c. Bond yield information: Treasury long-term bond yield: DJ Corporate bond yield: Corporate (Master) bond yield: High-yield corporate bond yield: Tax-exempt (7-12-year) bond yield: d. Use stock exchange quotations to...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT