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Homework answers / question archive / Assume that the risk-free interest rate is 7% per annum with continuous compounding and that the divided yield (also in % per annum with continuous compounding) on a stock index varies throughout the year

Assume that the risk-free interest rate is 7% per annum with continuous compounding and that the divided yield (also in % per annum with continuous compounding) on a stock index varies throughout the year.

In February, May, August, and November, dividends are paid at a rate of 9% per annum. In other months, dividends are paid at a rate of 3% per annum.

Suppose that the value of the index on July 31 is 1,426. What is the futures price for a contract deliverable on December 31 of the same year?

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