The one-year futures price on a particular stock-index portfolio is 1,610, the stock index currently is 1,600, the one-year risk-free interest rate is 2.0%, and the year-end dividend that will be paid on a $1,600 investment in the index portfolio is $15. By how much is the contract mispriced? (Input the amount as positive value.)
The futures price is $_ _ _, its "proper" or parity value.

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06-12-2022
Business

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The one-year futures price on a particular stock-index portfolio is 1,610, the stock index currently is 1,600, the one-year risk-free interest rate is 2.0%, and the year-end dividend that will be paid on a $1,600 investment in the index portfolio is $15. By how much is the contract mispriced? (Input the amount as positive value.)
The futures price is $_ _ _, its "proper" or parity value.

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rekharaypriti8910 rekharaypriti8910 · Answer 1 · 2022-12-13T05:23:13-05:00

The one-year futures price on a particular stock-index portfolio is 1,610. The calculated parity value is $ 1,610.

An index fund is a portfolio of stocks or bonds designed to mimic the composition and performance of financial market indices. Index funds have lower costs and fees than actively managed funds. Index funds follow a passive investment strategy.

Calculating the problem:

F= 1610 x 1.04 - 22

= $1652.4

Actual F0 is 2,365, so the future price is $5 below its proper or parity value.

A portfolio is a living and changing collection of records that reflects your achievements, skills, experiences, and attributes. We'll highlight some examples of your best work, along with your life experiences, values, and accomplishments.

Learn more about portfolio:

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