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?
A) $943.40
B) $970.00
C) $1,030.00
D) $915.09
E) $1,000.00

Question

Quizplus · Accepted Answer

The value of a futures contract on the index can be calculated using the formula: Futures Price = Spot Price - Present Value of Dividends + (Risk-Free Rate * Spot Price * Time). Assuming a 1-year period for simplicity, the calculation is $1,000 - $30 + ($1,000 * 6% * 1) = $1,000 - $30 + $60 = $1,030.

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