The S&P/ASX200 spot contract is at 4055,and has a dividend yield of 8% p.a.The risk-free rate is 7% and the SPI futures price is currently trading at 4058.Given this information,calculate the amount by which the futures contract is mispriced according to the cost-of-carry model.

A) $ -7.01$
B) $ - 3.0$
C) $ 3.00 $
D) $ 7.01$

Question

The S&P/ASX200 spot contract is at 4055,and has a dividend yield of 8% p.a.The risk-free rate is 7% and the SPI futures price is currently trading at 4058.Given this information,calculate the amount by which the futures contract is mispriced according to the cost-of-carry model.

A) $ -7.01$
B) $ - 3.0$
C) $ 3.00 $
D) $ 7.01$

Quizplus · Accepted Answer

Using the share index futures pricing contract gives a theoretical futures price of F = 4055e^(0.08^-^0.07)F1F1F1S1^F1F1F10^90/365 = 4065.01.Therefore,the futures contract is mispriced by 4058 - 4065.01 = -7.01,where the negative value indicates the observed futures price is too low.Example 15.7

The S&P/ASX200 Spot Contract Is at 4055,and Has a Dividend −7.01 -7.01−7.01

The S&P/ASX200 Spot Contract Is at 4055,and Has a Dividend $-7.01$