16. Given a stockindex with a value of $1100, an anticipated dividend of $27, and a...
16. Given a stockindex with a value of $1100, an anticipated dividend of $27, and a risk free rate of 3%, what should be the value of one futures contract on the index?
Please show working and formula in excel!
Homework Answers
| Solution: | ||
| The value of one futures contract on index | 1,106 | |
| Working Notes: | ||
| The value of one futures contract on index | ||
| Expecting pay dividend of $27 | ||
| = stock index value x ( 1+ rate ) - Value of dividend | ||
| = 1100 x ( 1+ 0.03) - 27 | ||
| = 1133 - 27 | ||
| =1,106 | ||
| Notes: | Formula for stockindex paying dividend | |
| Future value | ||
| =S (1 + (r% x T/12)) - compounded valuee of dividends | ||
| In Excel format | ||
| A | B | |
| 1 | Value | |
| 2 | S= Stock index Value | 1100 |
| 3 | r% rate of risk free | 3% |
| 4 | T = time | 12 |
| 5 | compounded value of dividends | 27 |
| 6 | ||
| 7 | The value of one futures contract on index | 1106 |
| Formula used in above tab wee get 1106 | =(B2*(1+B3*B4/12)-B5) | |
| Please feel free to ask if anything about above solution in comment section of the question. | ||
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