Given a stock index with a value of $1,000,an anticipated dividend of $30 and a risk-free rate of 6%,what should be the value of one futures contract on the index?

Question

Quizplus · Accepted Answer

The formula to calculate the futures price is:
F = S * e^(r*t) - D
where
F = Futures price
S = Spot price or index value
e = exponential function
r = risk-free rate
t = time to expiry
D = Present Value of Dividend
Substituting the given values, we get:
F = 1000 * e^(0.06*1/12) - 30/(1+0.06*1/12)
F = 913.40
Hence, the value of one futures contract on the index should be $913.40.

Given a Stock Index with a Value of $1,000,an Anticipated